regarding a shortsale.

Asked by Luie, Los Angeles, CA Sat Jun 18, 2011

after much effort and no agreement on a solution,my lender has allowed me do standard shortsale. with an outstanding loan balance of $520,800 thr bank has agreed on a buyers $357,000 offer. my bank sent me a letter saying , after the sale is complete and im moved out , that i will owe nothing more and i even called several times to ask if i will be laible for any taxes or penalties on the remaining diffrence. the lender says no. the realter also agrees, except my lender now says i will reaceve a check for $35,000 to help with my moving expenses and to get me into a new place. what are my tax inplications? and is there someone outhere with same situaion? ive heard of lenders giving $3500 max. im not overly excited about this , i feel there is a seriou catch here.. whats the deal??

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5
John Juarez, Agent, Fremont, CA
Sat Jun 18, 2011
BEST ANSWER
Louie,

You have raised two major issues of concern in regard to any short sale: one is whether the lender will consider the sale proceeds to be payment in full and forgive any additional debt which may still be owing. This is a decision that can be made by your short sale lender and should be put in writing within the short sale approval letter.

The other issue is in regard to income tax liability for forgiven debt. In some cases you will have a tax liability and in some cases you will not. Your lender cannot answer your question about taxes and neither can I. Neither can your Realtor unless that person is also a trained tax professional. You must take you documentation to a tax professional for an opinion about tax liability.

In regard to the $35,000 payment that is being offered by the short sale lender. Get it in writing! I have heard of payments of that amount in some short sales recently. Would it be taxable income? Ask the tax expert, not the lender or a Realtor.
0 votes
Michael Robe…, Agent, San Ramon, CA
Sat Jun 18, 2011
Hello Luie, This must be and probably is, a clerical error. Nort unusual in this climate where many mortgage servicers are swapping files after being fired by one bank or the other. Any verbal communication is recorded, I know, however, the servicer will not make it easy to gain access to these recordings to help resolve an issue. Unless, of course, it benefits them.

Burden of proof is on the shoulders of your Realtor and you. Get it in WRITING!.

This should be very simple to resolve.

Michael
http://LosGatosHomesandRealEstateBlog.com
0 votes
Norman Aless…, Agent, San Jose, CA
Sat Jun 18, 2011
Luie,
You are wise to be very careful, I would not cash that check until I had this throughly checked out. As the other realtors said have your realtor check it out, I have never heard of something like this I believe it is a mistake, and would proceed accordingly.
At your service,
Allyson
408-705-6578
allyson@homesbyallyson.com
DRE# 01397256
0 votes
Andrea Wince…, Agent, Milpitas, CA
Sat Jun 18, 2011
That amount does not sound normal. Why would your lender approve a short pay on the loan of over 160k and then let you walk away with 35k? Your Realtor can look into this for you.
0 votes
Dot Chance, Agent, Burbank, CA
Sat Jun 18, 2011
Luie, I have never heard of a lender offering $35,000 to a short sale seller. Did they put that in writing? Show it to your Realtor as well as your escrow officer. I have known of people getting a check at closing for $3,000 through the HAFA program.

Congrats for getting the deficiency taken care of in negotiations!Dot Chance, Realtor®
Certified Distressed Property Expert CDPE®
DRE License #01494182
Keller Williams Realty World Media Center
http://www.DotChance.com and http://www.SummerBreakatHanalei.com
818.339.7712
Web Reference:  http://www.DotChance.com
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