Deficiency Judgement Vs 1099
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It's important for you to know that the lender cannot pursue a deficiency judgment and issue a 1099. They can only do one or the other, not both. If the deficiency is waived as a condition to the short sale, the homeowners will receive a 1099. I |
I have read this many times, and it seems to make sense. But is it true?
Also, does any one every followup with the home owners after the fact? How many actually receive a 1099 or get a deficiency judgement?
Brenda
i thought that 1099s and deficiency judments were the same thing. what exactly is the diffrence?
enlighten me please.
an IRS form 1099 is a tax document, while the pursuit of a deficiency judgment is a legal process.
You better to listen to words of ssp, because he know what he is talking about.
I am under contract to purchase a SFH by doing a short sale, and am negotiating with the lenders.
I want to be clear on the issue of deficiency judgements and tax ramifications for my seller.
Is it true that if the holder of the 2nd reduces the amount owed to them via a short sale (vs. losing all claims via a foreclosure auction), they CANNOT pursue a deficiency judgement but CAN issue a 1099 for the amount not collected?
Or, can they still pursue a def judgement even though they agreed to the short sale, but not issue a 1099?
Also, if the house went to auction and the 2nd was wiped out, is that the situation where the holder of the 2nd would sue for a def judgement?
The answer is quite simple... although some readers might not like it. The answer is, it depends.
Whether or not the lender waives its pursuit of a deficiency judgment depends on 1) whether state law permits lenders pursuit of deficiency, 2) contractual language in the mortage instrument,
and 3) the language in the terms of short sale approval.
Many lenders will agree to accept less... but retain the right to pursue deficiency. Best to negotiate that point early on... know your enemy.
There are only 2 things to negotiate at this point: the amount of discount GMAC will take on their $66K 2nd ....and the amount of your commission on the sale.
I would prepare a HUD1 showing a Realtor commission of 3%, with the balance after paying the 1st and closing costs, looks like about $20K, going to GMAC as payment in full of their 2nd. Nothing for the seller. Present this offer and see what happens.
That would be a final offer, no room for further compromise.
[addsig]
The house has already been sold at the Courthouse. In Michigan we have 6 months of redemption. And there are 48 HOURS left! I know it might sound crazy, but I am checking ...
Thanks.
I also have a feeling it is waaaaay too late to do a short sale. No way you can get it all together in time to beat the eviction.
And the judge is probably not going to listen to a sob story since he already had 6 months to work things out.
Let us know what happened. Good luck.
[addsig]
If there is 48 hours left in you redemption then you can call the bank and ask. It is very doubtful they will accept unless you can close very very fast. It never hurts to ask.
Just so you understand, once the redemption period is up the bank will need to file an eviction to get your homeowner out. The eviction does not happen automatically when the redemption period ends.
If the home owner is getting evicted then the redemption period ended already and he/she does not own the house. [ Edited by tbelknap on Date 07/25/2006 ]