Realtors Beware -- Short Sale Pricing

I would recommend consulting an attorney for a legal opinion on that one, casey. As I understand things (and I am not an attorney, nor do I pretend to act as one), in Florida, the home being the primary residence of the married couple, even though only one's name is on the deed, both are the legal owner of the property. I would imagine the same thing goes for the note, though I am uncertain. If it were not the primary residence, things might be different.

Yes, I agree about an attorney in this case. However, just speculating, since they were married after the house was purchased, the only name on the note would be the original owner who bought the house. I think the key issue would be the homestead rights of the new spouse. Florida's homestead protection is one of the strongest in the U.S. and protects your homestead from forced sale by creditors, except for the cases of property tax, mortgage, or mechanics lien. However, the borrower has to sign the mortgage which pledges the home as security and allows forced sale by the lender. The new spouse did not sign the mortgage, but would have full homestead rights.

A bank can foreclose on a homestead.

Hi All:

Great thread...

SJ, can you elaborate (see bold part of your post below)-

Sometimes, that means that the lender will "gift" the balance to the seller, and other times, the lender will hold the seller accountable for the difference. The latter is less common, but I'm working one of those right now.

Are you saying that more often than not, the bank forgives the deficiency and the seller walks?

Thx.

G

Hi All:

Great thread...

SJ, can you elaborate (see bold part of your post below)-



Are you saying that more often than not, the bank forgives the deficiency and the seller walks?

Thx.

G

The seller seems to walk if the property was their homestead but every bank is different and each bank keep changing the rules.

Even if the lender won't disclose the amount they will accept? How can you know that which you cannot know? It is a tough call, unless, like in the case where the home last sold for $5million + and is now listed at $10,001? Some things are obvious, but others not so much.

False advertising is illegal in Florida, because our State Representatives determined that it is against public policy to allow false and misleading advertising.

Either you know you have your banks permission to sell below your recorded mortgage or you are bound to your recorded mortgage. This false advertising is hurting the decent Floridians and Americans who choose to play by the rules.

The seller seems to walk if the property was their homestead but every bank is different and each bank keep changing the rules.

Where can I get a copy of the rules you mentioned? Thanks

Hi All:

Great thread...

SJ, can you elaborate (see bold part of your post below)-



Are you saying that more often than not, the bank forgives the deficiency and the seller walks?

Thx.

G

I have no statistics on it, and should have prefaced the statement with, "It's my experience that..." Whether or not a lender will "gift" the deficiency should depend on the owners' assets and ability to pay. Remember, if the lender does "gift" the deficiency, the IRS may come around with it's hand out, saying that the "gifted amount" which you "received" is taxable! There are cases where people will be able to show that they cannot pay the IRS tax, but I guarantee you that the IRS will be staffing extra ppl to work on trying to collect it anyway.

One last thing that I would like to add is that the phrase, "the seller walks," bothers me a bit. It almost sounds as though there is zero consequences to the seller, but that is far from the truth. They may be able to get some debt problems when they "walk away," but credit is hit, and for someone in financial trouble, that may be just the start of the financial problems forthcoming. Sure, the real start came earlier, but this is when others will begin to squeeze harder.

The seller seems to walk if the property was their homestead but every bank is different and each bank keep changing the rules.

So please dummy this down for me. If one paid $650K for a house in South Walton (just for kicks let say they put no money down). So in this case we are talking about 2 mortgages...

For dramatic effect- let's say the house is worth $400K in this market.
😱

Are you saying that it is at all probable that if they homesteaded it that they could give the house back to the bank (deed in lieu) and not be on the hook for any deficiency?

EDIT: not be on the hook to the banks- let's keep Uncle Sam out of the conversation for now

Where can I get a copy of the rules you mentioned? Thanks

There are no rules. They change daily. :bang:

there are no rules. :bang:

yet.

I have no statistics on it, and should have prefaced the statement with, "It's my experience that..." Whether or not a lender will "gift" the deficiency should depend on the owners' assets and ability to pay. Remember, if the lender does "gift" the deficiency, the IRS may come around with it's hand out, saying that the "gifted amount" which you "received" is taxable! There are cases where people will be able to show that they cannot pay the IRS tax, but I guarantee you that the IRS will be staffing extra ppl to work on trying to collect it anyway.

One last thing that I would like to add is that the phrase, "the seller walks," bothers me a bit. It almost sounds as though there is zero consequences to the seller, but that is far from the truth. They may be able to get some debt problems when they "walk away," but credit is hit, and for someone in financial trouble, that may be just the start of the financial problems forthcoming. Sure, the real start came earlier, but this is when others will begin to squeeze harder.

I can guarantee the "gifted" amount is taxable. It's the same as the write-off on a credit card. The IRS loves to consider it taxable income.

I can guarantee the "gifted" amount is taxable. It's the same as the write-off on a credit card. The IRS loves to consider it taxable income.

The Mortgage Forgiveness Debt Relief Act

What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.
What does that mean?
Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income.


Also if it were a second home or investment property:

Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.

If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?

Yes. The forgiven debt may qualify under the "insolvency" exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent. A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Also, if one has an attorney, and doing a short sale, they can negotiate with the Bank to not have a 1099 issued for the deficiency balance.

Here's the Short Sale Academy's Valedictorian:

http://www.youtube.com/watch?v=O8ii3TbVGZs

I understand he's working toward a Second Major at Hamburger U.

Hi everyone!

I felt the need to jump in on this conversation. 🙂 First off, thank you to [ame="http://www.sowal.com/bb/member.php?u=3336"]SoWal Beaches Forum[/ame] for adding our announcement to the forum!!

I just wanted to clarify that the video that was posted above has no affiliation to ShortLeads.com (the URL displayed on the video is not ours!).

I wouldn't know whether he took our course before or not, but if he did, I certainly hope he's not selling burgers now.

Thanks for the clarification, Mango. I don't like rambling about legal IRS stuff, so I appreciate you posting the link to the source. As pointed out in that link, their are exceptions to every tax law.