Deficiency On 2nd
Hi there,
I have negotiated a payoff with a small, local second bank/lienholder at 10% of the principal. I will be paying off the first in full.
I have advised the seller that the forgiven amount may be reported to the IRS and could be taxed as income, and she signed a doc for me to that effect.
My question: Could the 2nd also go after her in Court for the remainder? Just trying to keep bases covered.
Thanks in advance.
Hi cz333,
Could they . . .sure they can. I always make my offer to the bank as follows:
My offer is contingent upon --------- Mortgage agreeing to the Short Sale and that Chase waives any possible deficiency judgment against the borrowers.
Get the bank to put this in their acceptance letter.
BAMZ
Depends on your state laws.
Tom
They can't have their cake, and eat it, too. Meaning, that once they agree to release their security interest and accept the payoff as payment in full... they can send an IRS form 1099 which indicates FORGIVEN debt.
If they do this, they can't come back and pursue the unpaid portion that they had already forgiven.
If they do, make certain that the Sellers have the mortgagee short sale agreement in writing... which they'll need to produce as a defense.
Why not make it simple and simply BUY the second mortgage via an assignment?
Thank you for the quick responses!
The second has written an acceptance letter as follows:
"The '2nd Bank' agrees to release our second mortgage position for a cash settlement of $10K. Please acknowledge by signing below."
I haven't yet signed the doc. I have the deed (not yet recorded) and am conerned about doing the right thing. I'll ask the bank to add no deficiency as a contingecy, or ask them to assign.
Thanks again for the thoughtful responses. I am in Oklahoma, near nowhere, and do not mean to be coy regarding my location. Just skipped the profile in my zeal to read all the posts.