If it is your primary residence ,you dont have to worry about paying taxes on the foregiveness of debt. If it is a rental you might have to pay income tax on the foregiveness of debt. Consult with you tax person.
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Hi Linda,

Your agent should be answering all these questions for you, if they can't you might want to consider your choice in agents. BALANCE - depends on the lender, they could choose to give you a full release or they can reserve the right to collect the balance. It also depends if this is a purchase money loan or refi. Do you have a 2nd loan? As far as the property taxes the lender will pay them. You WILL most likely get a 1099, your agent should provide you with documents. You don't have to leave your washer dryer or fridge because they are your personal property - stove usually goes with the property. Check out IRS.gov for more tax information. I have provided a Link. For tax liability you want to consult a CPA, I do have a great referral if you need one, but this link will tell you about Cancelled debt which is a 1099C and insolvency. Two very important factors.

Hi Linda,

Personal property is usually not included in a sale unless you have specifically included it or the buyer has specifically included it in their offer. So, you probably don't have to worry about that.

In order for the sale to complete the taxes must be paid. Consequently, the bank will pay those as well as the other expenses of the sale.

Now, regarding the shortfall; this is where your agent, on your behalf, works out the best deal they can with your lender. The process involves your providing a great deal of paperwork so that the lender can be sure they are not being taken advantage of. If you have savings or other assets (another house or a large bank account) the lender will often try insist that you make up some of the shortage. If you have no other assets the bank will usually take the loss and write it off..

Depending on the exact details of your loan you might be able to avoid paying income taxes on the shortage. Without going into too many details, there is a law that says "debt forgiveness" is income and taxes must be paid on it. Earlier this year another law was passed that exempts people from having to pay these taxes. There are eligibilty requirements which you should check with your tax advisor.

Good luck,

John Hickey
Dilbeck Realtors, GMAC
818-541-7311
John@JohnHickey.com http://www.LaCrescentaHomes.com

Hello Linda. What happens to the deficiency will really depend on what you negotiate with the bank. Some banks will write it off, others will ask you sign an unsecured note which would be payable over 20 years many times at 0% interest or they'll just agree to the short sale without releasing the claim and you won't know whether they'll write off the loss or will try to collect it after the short sale. If the lender writes off the loss, it will issue a 1099 and whether you'll owe taxes on the amount that's reported on the 1099 will depend on whether the loan was a purchase money loan or refinance or home equity line of credit. You should definitely consult with a tax professional before you sign any short sale agreements with your lender(s). Real estate agents cannot provide you with tax or legal advice. If you don't have a CPA, your agent should be able to refer you to a tax professional who is familiar with short sale related tax issues.

Unless the buyer agrees to pay the property taxes, the lender will pay the property taxes. It's part of the short sale agreement. Although the lender will pay for the taxes, you have to remember that anything the lender will have to pay will increase the deficiency.

As far as your question concerning the major appliances is concerned, you only have to leave what's built in. Unless the washer and dryer and refrigerator are built in, they are considered personal property items that are not included with the purchase unless the contract specifically states that they are included. The same is true for the stove. If you don't intend to leave the stove, the listing detail should state that the stove is not included. Personally, I would not recommend you exclude the stove as people who buy houses will usually expect the stove to remain. Your agent should give you guidance as to what you can take and what you should leave.

Good luck to you.

I assume you are asking because your listing agent either did not give you a clear answer, or she did give you an answer and you are seeking a second opinion for validation. I will assume your listing agent, gave you basic infomation but probably told you to check with a tax expert about the tax liability and to check with an attorney about the legal or debt liability. You are going to get that same evasive answer from the real estate pros on this forum as very few of us are also attorneys and / or tax preparers.
We get into trouble if we give tax advice or legal advice, without specific expertise in those professions.



The one thing we are allowed to answer is the appliance question.
The stove is considered to be real estate, even if it freestanding. The other 3 appliances are personal property if free standing, (which they usually are) real estate if they are built-in.