Short Sale/foreclosure
Filed Bankruptcy in 2000, lawyer did not file necessary papers to reaffirm home with bank. We never knew this until now.
Fell behind on our mortgage early this year. Called bank several times for assistance, was only told to continue making payments. Said they could not do a deferrment or any other type of payment help. Bank never called us or sent us letters regarding our past due amt. Wierd I thought, so i just kept calling. On my last call I was transferred to loss & litigation and was informed that we were in foreclosure. Was told then about the papers to reaffirm the home were never filed and thats why they couldnt call me. So the bank wanted an agreement of $1500 down, $1300 per month for 6 months. We entered into the agreement to buy us some more time.
Original note on house was $119K, currently owe $132K ?? Dont ask how it went backwards, because i havent a clue and no one will explain it to us. Also have a 2nd mortgage balance of $19k. Cannot refinance because cannot get the appraisel high enough. Cannot sell for the same reason. Should we contact bank to ask for a short sale package, so we can sell the home for what it will appraise for? Will we be taxed on the difference as a profit? Any idea what a short sale will do to your credit report? Suggestions?
thanks :-? [ Edited by amyk on Date 05/04/2004 ]
Selling the home via a mortgagee approved, preforeclosure short sale would allow you to prevent a court ordered foreclosure sale, and allow you some degree of control as to when you sell, move, etc.
You'll need to contact a real estate broker skilled (or at least familar) with the short sale process to list your home, and market it subject to a short sale restrictive clause.
Contact your mortgagee and ask that they send you a workout package, specifically for a short sale.... do this for both your mortgagees.
Do you have a friend or family member who would be willing to purchase the home (at a discount) and allow you to remain as a tenant?
The IRS views forgiven debt as taxable income. Will you have a tax liability? That depends. In most short sale scenarios, the issuance of a 1099 is a non issue... there is no tax liability. But again, that depends.
Feel free to PM me if you have any questions, or need help.
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Short Sale Practitioners can't predict, or guarantee results... but can take steps to insure the likelihood for success....[ Edited by TheShortSalePro on Date 05/04/2004 ]
Thanks for the quick reply. Do I contact the loss/litigation dept for the package?
Do I have to have the home listed already or can i find out if they will accept a short sale first?
thanks
Start with whatever name and number is on the last letter you've received from your lender (not their attorney). They won't be able to tell you if they'll accept a short sale until they have a completed application in front of them.
Locate a qualified real estate broker who will devise a proactive short sale listing. Simultaneously, complete the short sale application.
Start with your junior mortgagee.
If you have specific questions, check my profile.
[addsig]
Hopefully shortsalepro will follow up, but I will try to answer a couple just in case. I think you can contact for a short sale packet, but you may want to have the short sale buyer do th contacting. Not sure about the tax question, But you should know that generally in a short sale, the bank has the ability to go after you for the difference. Considering you are probably not in the best financial position right now, they probably will not. If they do, obviously that would be bad for your credit.
Someone will need the packet eventually. You may want to get all the phone numbers ready for prospective buyers, so they can get answers quick and move forward.
This is just an idea, which shortsalepro may agree or disagree, but perhaps you can work out a deal where you show you are financiallly unable to make payments, but would cooperate in the timely purchase for the new buyer and full cooperation on a speedy change of possession, along with excellent maintenence of the property in exchange for forgiving the debt. In short, don't ding me and property will be sold in current condition. Good Luck!
nlsecor
Mortgagee's pursuit of a deficiency judgment and debt forgiveness are two, separate courses of action.
It is the act of debt forgiveness that triggers the 1099 and (possible) tax liability.
Can someone explain the "reaffirm" portion of this??
quoted: " Was told then about the papers to reaffirm the home were never filed and thats why they couldnt call me. "
What does reaffirm mean, why wasn't it done and/or caught that it wasn't done, and why couldn't they call them???
Kath
Kath
Once we filed bankruptcy and the house was not reaffirmed (meaning we wanted to keep the property), the bank was not allowed to contact us. Of course we were blindsided by not knowing any of this. During a bankruptcy lenders are not allowed by law to contact you, so this is where the bank for our mortgage fell into play, since their loan was "according to them" included in the bankruptcy. But as long as we continued to pay on it, as we did ...nothing changed except for the fact that they were not allowed to call or write us. Did i explain this correctlly?