Home Selling in 32837>Question Details

M R, Home Buyer in Orlando, FL

Is the Bank forgiving the loss in my short sale? What are the key words that Short Sale sellers need to be aware of in terms of defincient liability?

Asked by M R, Orlando, FL Mon Jun 7, 2010

I got my Short Sale approval letter on Friday (I am the seller). It is a 2 page letter but I think these are the pertinent parts:

If the Short Sale payoff amount ids remitted to us, Chase Bank will:

a) File a 1099-C form with the IRS and send you a copy.
b) Release your mortgage on the public records
c) report the transaction the credit bureaus as paid in full for LESS than the full balance

What are the key words / verbiage that Short Sale sellers need to be aware of to avoid them (sellers) being liable for deficiency judgements?

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Answers

9
The 1099-C does mean that they have charged off the debt on their books. However, that does not mean that they have given up their legal right to pursue the deficiency. They still may file for a judgement or sell the note to a collection attorney or agency who may do the same, only more vigorously.
0 votes Thank Flag Link Sun Sep 12, 2010
You also should review the letter with a tax professional (CPA) to understand how the the Mortgage Debt Foregiveness Tax Relief Act of 2007 applies to your situation and whether you have any federal tax liability as a result of the short sale.
0 votes Thank Flag Link Sun Sep 12, 2010
I can say that a 1099-c is a good thing if this was your primary residence. They are charging off the debt and giving you a Form 1099-c to file on your tax returns. Contact a local attorney to read the entire letter and its verbiage to ensure they are releasing you of the liability and any deficiency's.
0 votes Thank Flag Link Sun Sep 12, 2010
I definitely recommend having an attorney review the letter. Only an attorney licensed in your state who is familiar with Florida real estate law, and more importantly, Florida debtor/creditor law can give you their best professional assessment.

Your letter does seem a bit vague. While it talks about the terms of the short sale and the release of your mortgage it doesn't specifically address the note that you signed (which is technically a different document or instrument than the mortgage. Some short sale approval letters clearly state that the lender is retaining the right to pursue a deficiency. Some letters state that the debt is being forgiven or being released. Your letter seems to be in the ever-growing category of vague letters. More and mroe we are seeing verbiage such as "release the lein" or "release the mortgage"

I have spoken to a number of attorneys in both California and Nevada about this topic over the past year. There are different opinions on what lenders might do with these mortgages down the road (hire attorneys on contingency, sell to collection agencies, do nothing?). Most of the attorneys do agree that nobody knows how much of a legal ground lenders will have to stand on until these letters get tested in courts.

Besides for consulting with your attorney I would also ask Chase (or have your attorney ask Chase) if they are releasing your debt obligation or if they are specifically retaining that right (subject to FLA law).

Mike Weller
MBA, ABR, SFR, HAFA, e-PRO
Certified Short Sale & Foreclosure Specialist
Certified Government HAFA Program Specialist
310-909-6176
http://www.SouthBayShortSaleSolutions.com
CA License #: 01846714 | NV License #: S.0070209
0 votes Thank Flag Link Tue Jul 6, 2010
It is very IMP to show the short sale approval letter to you real estate attorney, as the terms are clearly stated in that letter.
Most banks want the letter signed & faxed back, but some times they do not want a signed copy. Take your attorney's advice before accepting the terms on your short sale approval.
Good Luck.
0 votes Thank Flag Link Sun Jun 13, 2010
M R:

A recent phrase that I learned of is " Acknowledgement of debt" ~ This was stated in the lenders final approval as a pre-requisite to closing.
0 votes Thank Flag Link Thu Jun 10, 2010
I will get my own independent lawyer to review.
Someone told me in the meantime that because the lender is supplying us with a 1099-C form that this means that they can't pursue a deficiency judgement in the future. not sure if that is true but that's what I was told.
0 votes Thank Flag Link Mon Jun 7, 2010
M R,
The good thing is that the letter doesn't mention that the bank has the right to pursue a deficiency judgment. But just because the letter remains silent on this doesn't mean it has waived its rights to pursue. You may want to try to get 'waiver' language in the letter, but don't count on the bank doing it unless you have extenuating circumstances, like job transfer or illness.

Judy Chapman
Coldwell Banker Residential Real Estate
521 E Mitchell Hammock Rd
Oviedo, FL 32765
Direct: (407) 227-7763
Office: (407) 365-9090
Judy@OrlandoHouseSales.com
Homes of Distinction | Short Sale Specialist
Winter Park, Winter Springs, Oviedo, Maitland, Downtown Orlando & East Orlando
0 votes Thank Flag Link Mon Jun 7, 2010
Hi MR,

You should have an attorney review your short sale letter, in order to get clarification on your questions/concerns.

Regards,
Mike Allende
Keller Williams Realty
407-595-5462
http://www.MikeSellsFlorida.net
0 votes Thank Flag Link Mon Jun 7, 2010
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