Yet another short sale ?
If you can get the bank to discount a mortgage or short sale (assuming these are the same thing) is there any positive or negative consequences for the seller other than getting out from under a problem?
Thanks
short answer: tax liability, and a blemish on their credit
The blemish on their credit for a short sale isn't as harmful as would be a completed foreclosure sale, and how it's reported to the credit agencies is negotiable. There is some 'after the sale'
follow up that can soften the adverse impact, too.
There is a difference between purchasing a mortgage at a discount via an assignment (takes cash, and you are buying paper, not stix and brix) and acquiring a property via a mortgagee approved short sale. But that's another post.
When a mortgagee forgives all or a portion of a debt, the mortgagee will report the forgiven debt (their loss) to the IRS. The IRS, in turn, will treat that forgiven debt as income to the homeowner. As you know, some income is taxable.
In the majority of short sale scenarios, the Homeowner receiving debt forgiveness will receive a 1099 reflecting the forgiven debt as income. They may or may not have a liability to pay tax on that income.
In most cases, they have no liability, but must demonstrate to the IRS why that incme should be exempt from taxation.
Thanks for the reply. I will try another post to get more info on the difference.
Thanks again - Kevin