Short Sale Side Effects

I know when you do a short sale, that the lender can come after seller for the deficiency, and/or file a 1099 so that the seller has a tax liability. The experts then recommend that the seller can file BK to wipe out the deficiency or the tax liability because they are insolvent.

I have a situation where I want to do a SS, but I don't know if it could harm the owners more than if I do nothing and they hand the property back to the lender.

Here are the particulars...

The house is worth about 280K. Sellers owe 300K. House needs WORK. and it smells to high heaven. The sellers bring home about 4600 a month. If I am able to do a SS for say 200K, I could see where the lender would feel they could actually collect on the deficiency.

The problem is that the sellers already went thru a chapter 7 BK just 4 months ago, so wiping out the deficiency or tax liability thru BK is not available to them.

Should I just tell them that they are better off handing the property back to the lender because a SS is not in their longterm best interests???

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