2nd can still choose to pursue a dificiency judgment, but if your agent knows what they are doing, in most cases can negotiate a full release. Unfortunately, most agents don't know how to do this or know the difference between a release of liability and release of lien.
As always consult an attorney and tax consultant for your personal situation. Beverley 619-227-9263
approve the short sale and forgive the debt
AND NOT issue a 1099
AND NOT report anything to credit
Its not gonna happen.
Short sales are not a get out of jail free card. They're an alternative to mitigate the losses of a bad situation.
Furthermore, unless the client has 20-50% to pay the second out of pocket, the second isn't getting 20-50%. The first will pay off the second, and not for nearly that amount. Its been my experience the second will usually settle/release for more like 10%.
I would also suggest you dont attempt to practice law by recommending bankruptcy when you have no idea what the OP's situation is.
Another problem with a Short Sale if it is not your primary residence is you could end up with a significant Federal Tax liability. The lender will report the amount forgiven as ordinary income on a from 1099 to the IRS. If it's your primary residence you may qualify for an exemption. On a rental property, you cannot get that exemption. There may be other ways to avoid the tax consequences so in addition to talking with an attorney, you may also want to consult with a CPA that specializes in Real Estate "before" you sign a contract.
Hope this helps.
I would highly recommend that you contact a good real estate attorney with this question. Be sure to consult someone who has experience with short sales, and since real estate law can change significantly from region to region, it's best to consider professionals who also have experience in your neck of the woods.
Best of luck to you!
As I mentioned, to ad nauseam, those with good intentions familiar with other state laws other than CT, cannot answer this question, as well as those of us who are not licensed legal professionals
While I know you would like a direct Yes or No answer, there simply is not a "once answer for all". The Bank looks at many things. Job status, how much debt you have, what are the chances that you can pay back the debt in the future, what are you assets, etc. A bank will be willing to work with you, if it is a lose all situation! Also another major factor is, what are home values in your area. The bank will not want to hold that home in inventory, so if a Short Sell will produce quick results over foreclosure, you stand a good chance of them working with you.
Another major mistake people make when asking the bank for a short sell, is they forget to remain "humble". The old saying you catch more flies with honey is true. The short sell folks are over worked, and hear the same story hundreds of time a time, you are nothing more than a number to someone sittting behind the desk, When you contact the bank, find a way to make a connection with your short sell rep. It will give you an edge. Good luck. If you have any more questions, e mail me at firstname.lastname@example.org. I can help you find a agent in your area to assist you with this process
( This information is meant for general information purpose only is not to be construed as tax or legal advice, please consult your CPA or your state attorney for legal counsel )
Itâ€™s complicated, I will try my best. It can to be easy to understand !
Some states, Such as California, is a "non-recourse state" and banks cannot seek a deficiency judgment against the borrower if the loan was for purchase money on a residential one-four owner-occupied property. These loans are commonly referred to in the lending industry as "non-recourse" loans.
If thereâ€™s a second mortgage, HELOC, or other liens you are Personally liable from the debt that is a â€œ recourse - loan. With a Short sale you can negotiate to take care to avoid them later on !
The Good news is that California Gov. Arnold Schwarzenegger signed senate bill SB931 into law Oct. 1. The new short sale law prohibits mortgage holders from pursuing deficiencies after a short sale has been accepted. The law covers all first mortgages, and applies whether or not the property has been refinanced.
Home Equity Line of Credit. (HELOC). Second mortgages, other liens
This law doesnâ€™t â€™ apply.
Before S.B. 931, homeowners who sold their homes for less than the owed amount were still in danger of owing the amount bank was shorted, or the deficiency; only loans for â€œpurchase moneyâ€ were safe. Sometimes lenders were giving deficiency waivers, but
now it is required by law.
If you are facing a possible foreclosure, please don't give up hope and do nothing. Please contact me and let's talk.
In a 15 minute telephone call I can explain to you all the current options available to help you solve your short sale situation. ( 951) 858-5797 or send an email Ceciliarod@prudentialcaliforniarealty.com
I have extensive experience working short sales and am available to answer any and all questions you might have.
Through my English is not perfect I do have the expertise to help families avoid foreclosure.
MY SERVICE DOES NOT COST YOU ANY MONEY !
The consultation is absolutely free and confidential.
Cecilia Rodriguez. Specialist in Residential Real Estate, Pre Foreclosures Distress Properties Expert, Certified Action Specialist.
( 951 ) 858-5797
Lic # 01505884
( 951 ) 858-5797
Lic # 01505884
Prudential California Realty
Best of luck.
Realtor, DRE# 01891274
Century 21 All Moves
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Worse case they can usually negotiate the balance down substantially and the lender issues a promisary note with a resonable interest rate and time to repay.
However, when there is a second lien holder they seem to be more difficut to get the forgiveness because they usuallt are taking a hit for the entire amount owned.
Make sure you use a Realtor that has a working relationship with a law firm that is an expert in short sale negotiations.
The fact that the lender has agreed to the short sale does not mean that it has waived its right to seek a deficiency judgment against you for the short fall. In fact, many lenders will not agree to release a homeowner from liability for the short call and often wait several years before filing suit seeking a deficiency judgment in the hopes that his or her financial situation has improved. However, under the HAFA short sale program, participating lenders must release homeowner's from liability. However, this only applies to loans which are back by Freddie Mac or Fannie Mae.
In some states, such as California, lenders may only seek a deficiency judgment after a short sale in certain circumstances. I strongly recommend that you speak with an experienced real estate attorney in your area. A real estate attorney will explain all of the legalities and ramifications of a short sale to you so that you can make an informed decision before signing the short sale agreement.
For the best protection for the seller and his credit, make sure the following two (2) clauses are in the short sale agreement:
1. That the Lender will NOT 1099 the seller (or any other IRS notice), for any differences between the amount owed and the short sale settlement amount, and
2. That the Lender will not report ANYTHING negative (including the settlement) to the big 3 credit reporting services, and will report that the loan is paid in full only.
NOTE: Failure to include these clauses with expose the seller to taxes (treated as ordinary income in that year) for the differences in Item 1 above, and create a huge obstacle for any future loans (not just RE) for failure to include Item 2 above.
As for 2nd's, 3rd's, ect.? Junior lienholders generally have the right to foreclose, as long as the senior lienholders are paid in full.
However, most of these subsequent lenders will negotiate to take a portion of the outstanding balances of the borrowers loans (usually between 20-50%), instead of having to 'eat' (write-off) the entire amount as a loss for a default of these junior loans.
Again, make sure to include the clauses in Items 1 and 2 above in these settlements as well, otherwise the same conditions in the 'NOTE' above will more than likely occur with these junior loan providers.
To say the least, these are complicated legal, tax, and contract issues.
To make things worse, dealing with lenders with teams of attorneys looking out for their best interest complicates the entire short sale and junior lienholder satisfaction process.
Therefore, seek competent legal and/or tax advice from licensed professionals in your state within those fields.
Good luck with working things out
I do not practice in CT, only Mass and RI so our common practices may differ. But... When I find a homeowner in distress, I will definitely look at the situation closely to see if selling Short is the way to go. Hopefully they can avoid the situation with a Loan Modification. If not, we do the comps and gather all the documentation to forward to the Attorney our office uses. This puts the CLIENT in the best position to walk away free and clear.
Remember, its all about the client and not our egos or bottom lines!!!
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Consulting a lawyer is ALWAYS good advice...Answering every question you dont really know the answer with a standard "consult an attorney" advice is unnecessary. Are the points really worth it?
Again, to the person who asked this question. Please consult with an attorney how best to proceed based on your particular financial status..
It becomes very difficult for a buyer and seller who have come to an agreement to only find out in the end that a short will not work.
Again, consult with an attorney.
It sounds like you are having a difficult time and the best thing you can do is contact a Real Estate Attorney that can help you. There are many options available for you and depending on your situation you will get the right direction. Get a consultation since this is a legal matter and your future. If you need more information on who to contact, please let me know.
The goal is to get your lenders to relieve you of all future responsibility in exchange for the money they recieve. You need to make sure that you see this verbage in writing before completing a short sale. There are also laws in place by state, so you can check with a RealtorÂ® and/or attorney about the laws in your state.
We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.
Eli Givoni, Director
Short Sale Department, LLC
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