What Is The Seller Liable For?
I need a bit of clarification on what the lender is likely to make the seller repay from a short sale. I have an excellent opportunity to do a short sale but on the hardship letter the lender provides they spell out that the seller may be liable for all the funds. I was under the impression that the seller might receive a 1099 and need to pay taxes.
Any clarity on the subject is much appreciated.
Thanks,
Carlton
What the lender is willing to accept, and how the lender deals with the deficiency can be total or partial forgiveness of the remaining debt (which results in a tax event for ther seller) OR the lender agrees to release its security interest to facilitate the preforeclosure short sale sale but requires the former mortgagor to repay all or a portion of the remainder debt.
thanks for the heads up...
The seller may have what is referred to as relief of debt income. It depends on the facts in the case. To the extent of relief of debt under the IRS rules, the person would owe taxes. The lender would issue a 1099 as well, so there will be a paper trail for the IRS. They should consider getting a CPA to assist with the situation so they understand the ramifications.
No impact on the Buyer... unless the Buyer assured the Seller there would be no problems, and was later charged with dispensing legal or tax advice without applicable licenses.