Pre-foreclosure / Tax Return
Greetings Everyone!
I accidentally posted this under the Wholesaling Forum before, but got no response. Here’s the scenario. I’m finalizing a pre-foreclosure, with a husband and ex-wife who’ve both agreed to my deal (not easy with an "ex" involved). But a question came up. They’ve both been told that their income tax has been flagged by their current lender, and would be intercepted if they filed for their returns. Their question was, should they go ahead and file? Or, wait to see how fast we can close our deal? They both are in desperate need of the money.
Any advice, experience, thoughts form anyone? I hate to bring in an RE attorney, if there’s a simple answer here.
Thanks for your help.
What exactly to you mean by "flagged" and "intercepted" by the lender?
If you mean that they have placed a garnishment on any returns, then if that's legal in CA, it's certainly possible. But if you've negotiated the deal, then the bank shouldn't want any funds because you should have already addressed that problem, correct?
And to reinforce my running comment here; this site is for getting/giving opinions. The advice will come from your legal counsel, tax professional, etc. I don't think that you'd want to say in front of the judge (if it should ever go that far) "Well SIr, I was told this was legal on the TCI website."
REI is a business and businesses need professional opinions. Use your attorney when needed. It's a tax write-off anyway.
Roger
Hi Roger,
Thank you for your response. I wasn’t very clear in my first post – sorry about that. I didn’t mean to imply that I would tell them NOT to file their tax returns. Believe me, I know better than to give legal or tax advice!
I was more curious as to what happens with tax garnishments during escrow. Do they continue in full force until closing, and then the final payoff numbers just get adjusted? I’ve dealt with judgements and liens, but never tax garnishments.
I’m coming in with a new loan, not a sub2. But their lender is being kind of evasive as to their actual payoff (a little weird). I’m getting numbers ranging from 48k to 53k. The FMV is around 122k-124k, so it still works. But I can’t seem to find out if they have added garnishment fees or what. I’ll keep pressing them.
Thanks again!
BTW, I had to smile at the mental picture of standing in front of a judge saying. "But Your Honor, the folks at TCI said…"
Here's my opinion.
Go thru the normal closing process for your state, be that a real estate attorney or title company, whatever. Have the closing agent request a formal payoff amount of the existing loan. Have the lender note whether this is payoff in full, with any/all penalties, fees, etc.
Once you get that, you should know if your sellers might have any problems with the tax thing. My thoughts are that you agree to the payoff only if the lender makes no more claims against the sellers for penalties, judgements, liens, etc.
Roger
Thanks Roger!
You gave me some good thoughts and advice here. Sometimes I think I get a little too to the forest.... : )
Thanks again!