I own a 2nd home that my son lives in and pays the mortgage. He can no longer afford the payment. Can I short sale and what are the tax implications?

Asked by Hoping2escapeunscathed, California Wed Aug 3, 2011

I purchased the house as my primary residence while my own home was being remodeled. Once my house was done I moved out of the newly purchased house and he moved back to my remodeled home. My son assumed making the payments on the 2nd home. I have never collected rent on it or claimed the interest on my taxes. Its basically his house with my name on the loan. We are both on the deed. He cant make the payments and I dont want the property. Basically im looking to get rid of this as painless as possible. I just dont know what the tax implications are and how the house will be viewed(vacation property vs rental property?)

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Paul Rinde, Agent, Menifee, CA
Wed Aug 3, 2011
Yes, you can always try to short sale your home. Whether or not you will get an approval is another matter. It sounds like you have a bona fied reason to short sale and it does not hurt to try. Finding a local realtor with the education and experience (references) in your area would be a great start. As far as the taxes go, consult with a tax accountant.

Go to http://www.cdpe.com to find an educated realtor. Don't forget those references. Education alone means nothing especially when we are taliking about a short sale.

Good luck!
1 vote
Eli Givoni-S…, , Boca Raton, FL
Wed Aug 3, 2011
Yes, you can short sale your home. You will need to consult an accountant regarding your tax liability. There are many circumstances that can affect your tax liability. Your tax liability will likely depend on how the bank handles the deficiency, as well as, your personal financial situation.

Feel free to give me a call, and I can explain the process to you.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states

MARS Disclosure for General Commercial Communications
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes
Walter 'Skip'…, Agent, Brea, CA
Wed Aug 3, 2011
Hi Hoping,
First, to get the banks to approve the short sale you will, more than likely, need to prove financial hardship. Christine has provided you with a good web site for your review. In my opinion, the bigger issue is taxes. I would talk to a tax professional before deciding what to do. The loss on a short sale is a taxable event. The goverment has provide some relief with the Mortgage Debt Relief Act. It allows for this income to be excluded in certain situations. You need to see if you qualify for this relief. Good luck,
Web Reference:  http://ocnorth.com
0 votes
Terri Vellios, Agent, Campbell, CA
Wed Aug 3, 2011
First let me disclose I can not give legal or tax advice.

There is a new law in California which removed the deficiency judgment. In condo & homes (1 to 4 units) If your lender takes money in a short sale that is the only recourse. If they forgive the debt and don't take money that is another question.

You have several options when faced with financial difficulty on your home. Short sale being only one of them. You ability to short sale will be determined on your financial hardship. Obviously you do not want to disclose your personal financial information on a public forum. I suggest you contact a real estate professional who is skilled in short sales in the area you live and have a sit down person to person meeting with them. They will give you your options.

If I may be of further help, drop me an email and I'd be happy to give you directions to a profession in your area.
Web Reference:  http://www.terrivellios.com
0 votes
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