If you have a buyer who wants to buy your home for more than you owe the mortgage company on a foreclosure is that a short sale or a cash sale?

Asked by Karen Linek, Boca Raton, FL Fri Sep 21, 2012

Are there any tax differences for the IRS?

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Annette Law…, Agent, Palm Harbor, FL
Fri Sep 21, 2012
'on a foreclosure" - FORECLOSED means the bank, not you, are the owner. At the foreclosed point the short sale opportunity has passed. Let us assume the bank HAS NOT FORECLOSED and you are the owner and perhaps the bank has sent you some correspondence of an unfortunate nature.
If the offered purchase price will pay off the mortgage balance, professional fees, seller closing costs then you have a traditional sale. Even if you make ZERO profit, it would still be considered a traditional sale. Even if you have to kick in some under-the-pillow money to complete the deal, it would still be a traditional sale.
However, you need to know the details of the written purchase offer. Other things may happen after signing the agreement such as:
- The buyer chooses to finance instead of pay cash. Now there will be an appraisal that you may have to deal with. If you are unprepared, and do not have a strategy in place, this could create real complications. Your agent will know how to address this potential problem
- The buyer may have included an inspection contingency that will create another negation point that may alter the net proceeds of the sale and push the outcome towards a short sale. Again. consult your agent to insure this DOES NOT HAPPEN.

- Take care that a missed closing deadline will not cause such economic hardship, pushing the result into a short sale. A "Never Ever" use for any purpose lender who failed to perform on a recent purchase did create just such a calamity. The consequences to everyone involved are tragic. The smoldering ruins left in the wake of this banks inability to perform will be evident for years..in the lives of the citizens effected. Missing the closing date, even for a cash purchase, can be costly.
Are there tax consequences? YOU BET!
Taxes are taxes, they play a role in any transaction.
The decisions you make, the ownership structure of this home, your situation, all have tax consequences. These consequences tend to increase in cost directly related the the lack of preparation before the transaction started. You need to consult your tax adviser or attorney to understand the tax consequence to you before entering into a sales agreement. Your multi-dimensional real estate professional will be able to reveal the array of options available based on your situation and the outcome needed.
You will need a true real estate consultant, not a sales person, to help you navigate through these and many other hazards associated with near Zero net sales..You may discover the best option for you is actually the one you are trying to avoid. Get the facts. You can not get them trolling forums on the internet. If you are serious. you will need to pick up the phone and call a Boca Raton real estate consultant.

Best of success to you.
0 votes
Ron Thomas, Agent, Fresno, CA
Fri Sep 21, 2012
A Seller may legally sell a house for ANY amount of money; do one can dictate to them.
If they sell for less than they owe; then someone will have to come up with the cash difference.
When the Bank is expected to eat the difference, then it becomes a Shortsale.
If the Buyer pays more than is owed, the Bank still gets just what they are owed.
If the Sellers walk away with nothing; then that is their business, and no conern of the Bank.
And whether or not it is a CASH SALE, makes no difference to this conversation.
The IRS is only involved if the Sellers make a profit, over a short term, and do not re-invest the money in another house. (This is a consideration which should be discussed with the IRS).

I hope this has helped.
1 vote
marc jablon, Agent, Boca Raton, FL
Fri Sep 21, 2012
If the buyer for your Boca Raton home is willing to pay more than you owe to the bank, and the bank has not yet foreclosed upon your home, this is simply a sale that allows you to walk away with no debt on your home and perhaps a small profit.

The process of foreclosure generally is lengthy; so while the bank may be in the process of foreclosure, the home remains yours until you are served with the final judgment by the court and told to leave the premises.

A cash sale simply means that someone has paid cash (no mortgage) for the premises.

If the bank has not already foreclosed, and you have a ready, willing and able buyer, then you will want to talk to your bank and tell them the circumstances. If the penalties you owe have not pushed the price of your home above what the buyer is willing to pay, then you will be able to sell, free and clear of any debt and without any negative marks against your credit.

A short sale occurs when the bank allows you to sell your home for less than you owe the bank.
Usually, there will be a negative impact on your credit rating for 2 years. If the bank forecloses on your home, your credit rating usually takes a 7 year hit.

Marc Jablon, The Jablon Team
RE/MAX Complete Solutions
0 votes
Eva Aliaga, Agent, Boca Raton, FL
Fri Sep 21, 2012
Karen, If you sell for more than what is owed, then it is not a short sale. You need to contact a real estate attorney that understands foreclosures.Also contact the bank that is foreclosing on your home. Time is of the essence.
Eva Aliaga 
Keller Williams Realty
0 votes
Nitza Ramos, Agent, Pembroke Pines, FL
Fri Sep 21, 2012
Hi Karen,

If the property is on foreclosure the higher the buyer's offer is, the more the chances of getting it from the lender as nowadays foreclosures usually get multiple offers. It's still a foreclosure not a short sale, no matter how much money is offered.

A short sale is done before the lender forecloses on the property. The lender works with the owner of the property, and depending on the owner's particular situation, the lender will decide whether or not they will let the owner sell it on a short sale. The reason being is that the lender is willing to take less money than what is owed on the mortgage. So in order to get approval from the lender to do a short sale on your property, you have to demostrate some type of hardship.

Hope this answers your question.

Best regards,

Nitza Ramos
Realtor & Lic. Community Association Manager
East Coast Realty Group LLC
11820 Miramar PkwyMiramar, FL 33025
Direct: 954-856-3156
Fax: 954-934-9530
Website: http://www.nrcv.com
**Blog: ask4realtor.blogspot.com
0 votes
Joan Lorberb…, Agent, Boca Raton, FL
Fri Sep 21, 2012

Are you in foreclosure now? I ask because of the way you worded your question and maybe I read between the lines.
I understand that there are companies and individuals out there who approach homeowners facing foreclosure under the guise of helping them when, in fact, they might be taking advantage of someone when they are at their most vulnnerable.

If this is the case in your particular situation then I suggest you speak to an attorney and a real estate professional about any arrangement (including signing over your deed) you might consider making. And, you should definitely be in touch with your lender.

Broker Associate, GRI
Lang Realty
9858 Clint Moore Road
Boca Raton, FL 33496
0 votes
Danielle Sha…, Agent, Cape Coral, FL
Fri Sep 21, 2012
Anything relating to taxes needs to be discussed with a tax professional.
0 votes
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