Here is my hardship letter that I wrote for asking the bank to allow a short sale on several of my upside-down properties like Larchmont and Burdett in Sacramento, and Guadalajara in New Mexico.
[See my updated hardship letter]
What is a “Short Sale”?
Sam Chapman a real estate agent from Austin puts it nicely in his Avoid Foreclosure with a Short Sale post:
This is a kind of sale that lenders may allow if a home owner is behind on payments and owes more than the market value of the home. A short sale occurs when a lender approves the sale of a property for less than market value because of a financial hardship. Lenders do not want to own real estate. They would rather take a loss on a sale than actually own the property. Lenders also don’t like to foreclose. It is a process that costs them time and money and then they are stuck owning property.
So the bank will loose a little now to avoid loosing a lot via foreclosure.
If the property is not sold via a short sale and nobody buys it at the foreclosure auction (trustee sale) then the bank automatically owns that property. At that time it’s called an “REO” - Real Estate Owned. The bank then lists the REO property with a local REO agent. The property goes on the MLS and is old in the traditional way.
Here is list of CitiMortgage REO properties. Only 6 in California?? Things must not be THAT bad yet!
The banks are not in the real estate business - they are in the MONEY business. Taking back a property creates a non-performing asset on their books. And too many non-performing assets is a bad thing.
Short Sales Increase in a Down Market.
The recent Sacramento Bee article talks about the emerging Short Sale trend (via Sacramento Landing):
Known in the real estate trade as a “short sale,” this desperate, but practical tactic — negotiating less than a complete payoff to lenders — reappears like clockwork when real estate markets sour. Widespread in Texas during the 1980s oil and real estate crash and again in the 1990s as California lost thousands of jobs to military base closings, short sales are back and proliferating, say local specialists who handled them in the 1990s. Elk Grove real estate agent Derek Kirk recently counted 264 short-sale listings in El Dorado, Placer and Sacramento counties compared with fewer than 50 six months ago…
Investors (and Banks?) Like Short Sales
John Nazareno of Foreclosure Information blog puts it this way in his Negotiating A Short Sale – The High Road To Huge Foreclosure Profits post:
The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy - buy the foreclosure from the bank at a big discount, sell the real estate, and make money!
John goes on to describe a Short Sale from a Bank’s perspective:
Short sales contracts help lenders unload unwanted property and spare many expenses associated with the foreclosure process. These expenses include, but are not limited to, court costs, bankruptcies, repairs and marketing. This is in addition to the $300,000 to $800,000 (or more!) normally held in reserve by lenders. Federal regulations require this reserve, which is usually many times over the actual price of the bad debt.
If I was the bank I sure would not want to deal with trying to sell a fixer-upper in a falling California market. They would have to either fix it up nice (banks are not in the construction business) or sit on the market for months. With so much inventory on the market the buyers are very picky. I learned first hand how tough it is to fix a property and sell quickly in this market.
Investors love shortsales because they can free up a huge chunk of equity. Nowdays a fix-n-flip investor can’t touch most properties because everybody is leveraged to the max. So once the banks becomes motivated enough to start discounting - the short sale game will begin. And it is already starting.
A true fix-and-flip investor needs to pickup the property at AT LEAST 30% off retail - MINUS repair costs. Also, hard money / private money lenders normally lend upto 65-70% of After Repair Value. So the ratio has to work for an investor before they can buy on a short sale.
I hear the banks are still letting stuff go at only about 80-85 cents on the dollar. But the ratio is dropping. Mr. Banker, do not take back that house! Sell it cheaply and quickly to an investor on a short sale. It’s Win-Win!
Short Sale Packet
The following paperwork is typically submitted to the bank by an investor (or agent) when asking for a shot sale:
- Authorization to Release Information - so the agent or investor can talk to the bank on your behalf
- Purchase Contract
- Hardship letter - personal statement by the homeowner explaining distress
- Financial statement - assets, liabilities, incomes & expenses
- Estimated HUD1 or Net sheet - showing the bank what they will get
Demonstrating Hardship with a Hardship Letter
Obviously, a Short Sale should NOT be allowed unless a borrower is in TRUE hardship. Some people might be tempted to try a short sale as an easy way to get rid of their over-leveraged property. They don’t want to come to the closing table with money out of pocket - even though they CAN.
I wish I could. I should have had some savings before starting all of my investing. I also should have been more careful with the equity I pulled out on some of the houses. If I had some money left right now, I could just drop the price and sell below pay-off. I would just have to come out of pocket at the closing table.
But instead I spent all my money on buying more properties and leveraging myself to the max. I only have myself to blame - bad planning and lack of construction and investing experience.
How to Write The Hardship Letter
The hardship letter is a personal statement from the borrower to explain the situation in “their own words”. Some say, the letter is also meant to pull at the “heart strings” of the loss mitigation agent - to make an emotional appeal.
Consider American Foreclosure Specialists’ advise on how to write a Hardship Letter:
A Hardship letter is something most Mortgage Companies will require to consider you for a “Work Out”. This is your opportunity to appeal to them to give you anther chance. This should not be used to complain to what they have done or not done to make your situation worse. This letter must be honest and represent the facts clearly. It must prove to them that the situation that caused you to fall behind was temporary and you are now in a position to make your payments on time. You must also have a legitimate excuse for falling behind… financial problems in itself would not be an adequate excuse. Loss of a job, death in the family or an illness would be an acceptable reason to fall behind on your Mortgage temporarily. We have many examples of letters that the Mortgage Company is looking for. Please contact us for a free consultation of your case.
That’s some good advice, though it’s more for the purposes of a “Work Out” - you’re asking the bank to give you another chance and keep the house. I think the same principles apply for what I am trying to do - SELL the house!
Hand-write: I wrote my letter by hand for extra appeal. Everything is computer generated now-days. A hand-written letter is very personal and should stand out from the pack.
Too Honest?
I wrote my hardship letter in a very honest and somewhat specific way. I’ve been even told that it’s too honest for two reasons:
1) Mentioning multiple properties. If the bank finds out that I have more then one property they will deny the short sale. They don’t care that I’m over-leveraged on all of them. They think if I have other property I must have at least SOME equity. “You need to sell the other houses first before asking us to take a loss”. Could this be an issue?
2) Owner Occupied Issues. I think it was an owner-occupied loan and I’m now telling them I “bought this house to fix and resell” and that I bought other houses for the same reason. Of course, there is always intent to move into the house if things don’t work out and I have to hold it. But my primary intent was to fix and re-sell. Could this cause some problems? We’ll see.
Do they even look at it?
Someone also told me that the loss mitigation reps don’t even look at the letter or my financials. They just check it off the list. They already know that I’m in distress because I’ve missed 3-4 mortgage payments. That’s proof enough. They just want to see the offer and see how much they will make. The net sheet is the only thing that matters. Is that true? Not sure… we’ll see.
Waiting for a Short Sale to be Approved…
Both of my Sacramento properties are in the middle of a short sale process.
On the Larchmont property I am working with a real estate agent who specialises in short sales. She listed the property on the MLS for a few weeks, lowering the price each week, until we got some offers.
We got two offers - 159k and 225k. The property is worth fixed up 260-280. I owe 330.
So my agent submitted the offers along with the short sale packet and my hardship letter to the first mortgage holder. We’re now waiting for a response. She says it will be 7-10 days. We’ll find out what the first is willing to take and how much they’re willing to give the second. Then we’re going to try to short sale the second. (I have a 80% 1st and 20% 2nd loan on the property).
The other Sacramento property on Burdett, is a little different. I am working directly with an investor on it. He is talking to the bank to negotiate a short sale and buy it from me. No agents involved. There is also only one loan on the property (100%).
The short sale packet has been submitted and the bank just ordered an appraisal. So the process is also moving along. I’m not sure what the purchase price is going to be yet. The investor is obvious is going to try to negotiate as low as he can to make some money.
So we’ll see which method works better - short sale via an agent or directly with investor.
I guess I could have also tried doing a short sale myself, using the knowledge from Real Estate seminars I have gone to and articles like “How to do a Short Sale” on eHow.
[See my updated hardship letter]
Are YOU Facing Foreclosure?
Did this Hardship Letter and Short Sale blog post help you?
I sure know what it’s like. I was facing foreclosure on 6 houses in 4 different states. I am still learning a lot about foreclosure, liar loans, short sales, hardship letters, and selling my house(s) fast.
Let me know if I can help you in any way… email me privately or leave a public comment below.
38 Comments
October 1st, 2006 at 7:59 am
[Shakes head sadly.]
Casey, you once again jump halfway across the chasm.
You say among other things; “I should have been more careful with the equity I pulled out and saved some of it.”
Much as Carlton Sheets may love the phrase “free up your equity” the truth is that this practice is called “take on more debt.” Additionally, 100% financing means there was no equity to encumber.
So let’s stay positive, the 1st takes the $210 and the 2nd in a moment of kindness agrees to nothing. You get nice 1099s totally about $140,000 for a Fed tax bill of ~$23,000 and California of ~$10,000.
Elsewhere you intone; “So my agent submitted the offers along with the short sale packet and my hardship letter to the first mortgage holder. We’ll find out what the first is willing to take and how much they’re willing to give the second. Then we’re going to try to short sale the second.”
Hey, there’s an idea ask the bank to GIVE another bank some money. You did tell the 1st there was a 2nd right? It wasn’t clear from the context. Not to worry, they’ll find out. Anyway… the 1st TD will then immediately contact the 2nd who will start looking at their recourse which used to be buying the 1st to protect their position. If comps are as bad as you say then the 2nd will purchase the 1st at a discount that will in all circumstances be higher than the deals you’ve structured. I suspect the offers you are quoting are structured like your previous deals with lots of side money changing hands. Doesn’t matter if I’m being cynical and/or wrong; the point is that the BANK will assume this and look very carefully.
My guess is this one will be taken away from you by the 2nd cooperating with the 1st and you’ll be presented with a $33,000+ tax bill. The nice tax guys have this way of knowing that you have other properties, some theoretically with equity. Can you sat tax liens? Boy, that sure makes it fun to try and dispose of property quietly.
Yoou’ll need some luck.
October 1st, 2006 at 10:50 am
Have you actually sent this to the bank? You might want to listen to your advisors….
I’m not a banker, but I think hardship letters are supposed to describe hardships. You quit your job and ran out of cash. That’s a hardship? Have you considered getting a job? I’m sure this letter will stand out, but in the way you want!
October 1st, 2006 at 11:12 am
As Cote said above, be prepared for the taxes. If the short sale goes through, you rocket into a high tax bracket. AMT might kick in, which eliminates a portion of the interest deduction too.
That 1099 for loan forgiveness is going to be a doozy.
BTW, why did you decide on short sales instead of an immediate bankruptcy?
October 1st, 2006 at 11:54 am
Casey, you have a webpage and blog. Couldn’t you have typed out the letter on MS Word. Why did you write it on notebook paper? Does it make it look more personal? or make you look more inexperienced or young?
October 1st, 2006 at 12:38 pm
Robert, I don’t think the second is going to want to protect its position. That’s because if this thing goes to auction they are probably not getting anything out of it. The first is at 265 and that’s what the home is worth right now. There is not much room for the second to get paid.
October 1st, 2006 at 12:41 pm
San Diego Renter, I know my letter is not the typical hardship. However, if you take my financial statement where I show 20K of monthly expenses then it becomes more clear - I can’t float this thing - EVEN with a job.
October 1st, 2006 at 12:42 pm
Ken, I hand-wrote the letter because it makes it more personal and will stand out.
October 1st, 2006 at 2:44 pm
We got two offers - 159k and 225k. The property is worth fixed up 260-280.
That’s a common misunderstand of how a market functions. The buyer decides what something is truly worth.
If nobody will pay $260K for a property, then that is not its worth. It may be what you want it to be worth, but that is not the same thing.
October 1st, 2006 at 3:06 pm
Casey,
Your letter will be forwarded to people who deal with hardship letters all day long. I doubt your arguments about public service and inexperience will move them.
The hand written letter nowadays is a rather clumsy bid at sympathy. I’d imagine writing a compelling and well organized typed letter (Times New Roman 12 or 14 point font) would be more likely to get the bank on your side.
Just clarify your financial situation, make it clear that you’re a parched rock and there’ll be no point to squeeze you further. Make the case that the earlier they make a deal with you, the lower their losses. They’re not going to feel sorry for you - if they were that kind of bleeding heart they can’t keep their jobs for long. Just make it easy for they to justify let you go.
disclaimer: not legal advice, talk to your attorney and do your own research before acting.
October 1st, 2006 at 4:58 pm
Ok, I am officially sick of “Casey” and his website. I’ve read his entire blog and it’s covered a ton of helpful advice explaining how he can get out of this situation but he refuses to truly listen or acknowledge his part in the story.
We’re now in a territory that is playing out like a very bad, poorly scripted, reality TV show. We **ALL** know “Casey” has acted criminally and lied in order to get what he wants. We **ALL** know he was acting for his own financial benefit despite what his hardship letter states. We **ALL** know he should file Bankrupty but instead we get these continual posts attempting to market himself and his situation. He **COULD** get a job, he **COULD** rent the homes out, he **COULD** do several things to try to mitigate his monthyl obligations. Instead, he just keeps blogging and hoping a bigger fool will step in and relieve him of his absolutely selfish and greedy decision.
“Casey”, please do what’s right and actually, for once, live up to end result of your actions. People like you do not represent the best of America. Your greed affects every normal person who wants a house but refuses to be either as foolish or criminal as people like you.
October 2nd, 2006 at 3:11 am
You say; “I don’t think the second is going to want to protect its position. That’s because if this thing goes to auction they are probably not getting anything out of it. The first is at 265 and that’s what the home is worth right now. There is not much room for the second to get paid.”
You don’t understand being the 2nd. Right now rhey are finding out they have no position. They also are not as adverse to “owning” property. You are already on their hot sheet beimg 90+ days late and now they are finding out about a short sale far below their exposure. You had no business going to the first without including them. Anyway, any deal requires their approval. No matter what you can bring to the table they bring more by definition. Say you have a legitimate $225k offer and taxes are current. For the 2nd to top your offer would take a “bid” of $200k to buy the note from the first. $200k is lower than $225k? Yes, but the bank gets rid of a nonperforming asset in 48 hours for a slight discount to its’ new valuation and washes its’ hands. Should it give a provisional “yes” to your $225k the 1st faces weeks even a couple months of negotiations as you plead with the 2nd and continue to not pay anyone and put THEIR house in jepoardy of getting tangled up in foreclosure and/or potenial other litigation.
Right now you owe about $350,000 in mortgage, arears, penalties and “toxic waste disposal fees” (comissions, etc). Frankly I’m surprised you got even the $225k bid given your full disclosure. The $159k seems reasonable for the risk and grief an investor is taking here. This is the backside of flipping, flopping if you will. This also reveals the danger of 80/20s as you place yourself even further down on the food chain.
Astrid has this right. The proper (not financial advice with a ‘c’ now or ever) was to go to the “You can’t get blood from a stone” route. “Let’s clean this mess up and keep you and the 2nd as whole as possible.” Again, true or not, the scheme you propose will be suspected of being not an arms length transaction. It just looks in this deal like you’ll be getting back a little of the dual agent full comission or some other bit-o-cash at closing to keep you going.
Nope, the 2nd deals direct with the 1st and you get a 1099 in the mail when they’re done. See why so many don’t see any way out for you except through the courts? Very roughly, total disposal if possible, would incurr liabilities of $150,000 in taxes. Is owing the Feds and CA $2,000/mo indefinitely what you are working to make happen here?
October 2nd, 2006 at 10:12 am
I hope you did not send that letter to the bank. That is a terrible letter.
You have to put on there the information about the job that you used in your loan applications. If you said you were self employed then your hardship letter should be based on that and not that you quit your job. If you took the loan out for an investment property then you can talk about it being an investment. If you took the loan saying that it was a owner occupied then you need to live in the house.
You need to show that you are willing to pay your bills but you can’t. You also need to stop sending potential buyers to this website. The website with the houses don’t need to have all these blogging stuff. It does not make most people want to buy the property at any decent price.
Dude try to rent the places. Go down to section 8 or stomethng. Get some income. Maybe you can use the income to get a hardship program with the loans where they lower the payments and restructure the loan. Even use that in your conversation with them. Saying that you are trying to rent the place so that you can generate some income to pay them till you get back on your feet.
This is something I wish I was able to do with mine when I was facing forecloseure
Here is how I would write my Hardship letter
_________________________________
On __Date___ I bought the house to live in. Because of a series of bad investments and lack of income because I am no longer and currently seeking employment. Attached is my financial statement.
Sincerely,
I_was_there_man
_________________________________
October 2nd, 2006 at 11:51 am
Well, at least others will be thwarted when attempting this.
http://www.reitactics.com/New_.....ation_Tool
October 2nd, 2006 at 12:09 pm
Casey,
While your letter talks about “being inexperience,” I still don’t think you understand that point!
You seem to “still believe” that your skills can get you out of this mess.
October 2nd, 2006 at 1:43 pm
My lucky stars, Lee Siegel was here!
October 2nd, 2006 at 1:43 pm
Lots of people here seem to be recommending bankruptcy, but your case isn’t a good one for it in my eyes. The trustee will be asking lots of questions about the bucks you pulled out of these deals, and any one of a dozen(?) creditors has the right to pop up out of the woodwork and yell “FRAUD” .
I think your first idea about leaving the country was really the best one so far… A bank loss means a “1099″, and that means you will pay, no matter how long it takes…
Good luck!
October 2nd, 2006 at 5:36 pm
Casey, for the love of all that is sacred, please take that job you’re “considering.” Then maybe someone will take your “hardship” seriously and consider that you’re making an effort to truly make restitution. Otherwise, you’re just another navel-gazing slacker boy hoping to get bailed out, or you’re trying to con folks again. I’d like to think that you’re not either of those, but a handwritten hardship letter is not going to help you one bit. Actions speak louder than words. Shut down this blog, close the computer, and get to work. Please.
October 2nd, 2006 at 5:39 pm
Casey,
I hope you realize that the banks will issue a 1099 for the amount they write off and you will owe income tax on that amount.
October 2nd, 2006 at 7:20 pm
Maybe you can blame the ink pen you signed the contracts with.You seem to have blamed everything else..
If guns kill people, then ink pens should be responsible for bad contracts!!!
October 5th, 2006 at 1:30 pm
Casey, your hardship letter is as transparent as glass to any lender who would read it.
You did NOT buy these properties to “help” the community or the sellers, you did it to make a quick buck. NO ONE except maybe Oprah or Bill Gates would buy a property for those reasons.
AGAIN, HONESTY goes a long way. Just tell them you made a stupid mistake, you were greedy, and you’re sorry, but you are now flat broke and have no steady income. I think they’d appreciate hearing the truth for once.
And I wouldn’t count on a hardship letter helping matters much anyway. It’s all about the numbers (and that’s the way it should be, anyway). Banks are in the business of business, not social work.
And for heavens sakes, use a word processor. This idea that a hand-written letter will garner more sympathy is ridiculous. If anything, it will look CALCULATED and CONNIVING.
And please, get a regular old everyday job and stick to it. NEVER quit your day job ever again unless you are ALREADY a millionaire.
October 5th, 2006 at 5:51 pm
of my upside-down properties like Larchmont and Burdett in Sacramento, and Guadalajara in New Mexico. [See my updated hardship letter] What is a “Short Sale”? Sam Chapman a real estate agent from Austin puts it nicely in his Avoid […] Continue Reading October 1st, 2006
October 11th, 2006 at 8:55 pm
1099s can be negotiated and lowered. Ask a good accountant or IRS defenders, they will negotiate to lower your taxes.
October 19th, 2006 at 9:45 am
Oh yeah, I’m *sure* your motives were to assist others.
:::bursts into uncontrollable laughter::::::
November 13th, 2006 at 12:21 pm
Casey:
Ignore these negative comments. These are Idiots who dont know there laws and tax issues.
Here it is: you need to speak with and work with a tax accountant, and/or lawyer who works in taxes and real estate.
The bank CAN issue a 1099 for the relief of debt. Yes. this is true. What these idiots are failing to state is the following:
The 1099 can be contested with the following IRS form: Form NO _____ (and I will not post it here since it is work $500 bucks but for you my friend just email me and I will email you the PDF file of the form). File this form, work with the tax accountant to prove your financial situtation and you CAN HAVE THE DEBT REDUCED to reduce your tax burden for the debt.
There you go. An answer that CAN save your thousands.
See. that is a contructive comment. not all this bashing and negative comments from idiots you dont have dime or a grant deed to their name.
Good luck. Find the solution. You can do it, I know you can.
November 13th, 2006 at 12:36 pm
I think we have reached a new low.
To take advice from a person who confuses the word “work” for “worth” and many others.
Others have already mentioned ways of reducing tax hits by said forms. This is all good for HONEST people who made BAD choices.
Idiots here forget that FRAUD is not tolerated nor forgiven especailly by the IRS.
November 20th, 2006 at 9:22 pm
Very interesting read! I too purchased six properties and am now losing them all. I started the real estate deal with just one duplex…easy. That was going well, then a friend of mine offered me a handful of properties that needed some work, but I am a carpenter so, no problem. I structered the deal the same as you. I think in the back of my mind I knew it was fraud, but I never verbalized it, thus I denied it, or maybe justified it.
What was the big deal. I was already tanking care of the properties as his handyman. So, now I own ‘em and things keep on going no problem, right…wrong! First, I only cash I received was for taxes to that date and security deposits from current tenants. The properties all cash flowed just enough to make the mortgage payments and I would cough up the taxes out of pocket…call it “investment.” now I am totally leveraged, maintaining the buildings, and trying my damndest to bleed rent out of deadbeats with a lots of kids running around. Oh, sure, I am a sap. I should have kicked everyone out as soon as they were one month behind, but I didn’t. I guess I believed somehow I could work more hours to make up the money shorted in rents. Oh, did I mention that there are people who don’t know how to use a vaccuum cleaner, mop, garbage can, lawnmower, snow shovel, you get the idea. Or, how about shooting out every window in the house with a pellet gun in a drugged out stuper. That was after breaking into the downstairs tenants apartment beating him bloody and jumping on his arm, breaking it multiple times. This act, while causing the upstairs man to go to jail (no more rent from him), disabled the downstairs man (no more rent from him). Now what do I do.
So, compound that story 4 more times in the course of six months and here I am as well. A fraud, about to lose everything I have worked for twenty years. Yes, I worked and still work. As many hours a day as I can. I don’t want out of it, I want to fix it. I want to pay my debts…I can’t. i trusted the seller and I trusted the broker. I had never purchased property in my life. Live and learn…trust no one, especially renters! Again, I admit I was wrong. I was trying to establish some kind of residual income. I should have just worked nights at McDonalds.
Good luck Casey, I hope the best for you. I believe your intentions were pure. The American Dream is to be your own boss…live your own life. I don’t fault you at all for trying. But, you and I are both frauds…the question is, what price will we have to pay for this transgression.
December 11th, 2006 at 11:10 am
Everyone is talking about the 1099 that the lender will issue at the end of the short sale. It is my understanding after talking to my tax accountant this morning, that each person is garnted a $250,000 Federal Tax exclusion once every two years. That doesn’t matter wether you made money or lost money. In my case I have to sell short because my adjustable rate mortage is so out of control, I will eventually sart getting late and have to forclose. They way I also understand it, is the lender will report it on my credit as a $0 settlement in full. It will be a derog on my credit, but what does that do to my score? I guess it is better than getting 30-60-90 days on my report. Any help?
January 27th, 2007 at 8:20 am
Nice website
February 1st, 2007 at 6:45 pm
buyer to take over my payments also didn’t pan out, I decided to put my South Sac Realtor on the job (since my other realtor is too busy to help me on this one). I send him the documents he needs for the short sale and now I am just waiting to hear back. Even though the bank already approved a short sale at 248, my South Sac realtor tells me we need to list property at 239,000 in order to get any offers. Keep in mind I have one loan with a balance of 295 on
February 5th, 2007 at 10:50 pm
I need some help we’re behind w/ our mortgage and decided to foreclose or short sale? do u know if we’ll owe watever the difference from short sale or some lender would accept it as a full pmt? we we’re thinking if wer goin to owe some money will it be better yet file for bankruptcy? please let me know your thoughts. thanks
February 6th, 2007 at 10:58 am
Hi, I am a real estate invester in NC,and I don’t about Vegas but here if I were handling your case I would advise you against foreclosure. You won’t be able to buy a home for 10 years. If you decide to do the short sale I’ll be glad to handle it for you, and to answer your question I would deal with your bank. I would stop foreclosure and save your credit. Think about it and if you are intrested e-mail me and we’ll take it from there. OK ? Good luck. Danny
February 6th, 2007 at 11:20 am
Unless you can convince your mortgage lender to cut its losses and accept the short sale now, yes, generally you will be personally liable for the deficiency. If the bank decides not to pursue that, you will still have to report the difference to the IRS and pay taxes as if it were money earned.
If you allow the bank to foreclose on your house, it will have a more negative effect on your credit score than a short sale, but in many states you will not have to pay the difference.
February 6th, 2007 at 7:04 pm
My sister is trying to short sale right now. Lets say she gets 30,000 excused to clear title. Will she owe the whole $30,00 (because she will get a 1099), or will she be taxed on it like income? If she is only taxed on it, at what %? Will she be excused because of the 250,000 tax exclusion that Pat (#29) is talking about? Help me out.
February 10th, 2007 at 5:28 pm
Interesting website. If you are looking for help with your foreclosure go to: http://www.YourForeclosureTeam.com. If you are looking to invest in real estate doing short sales go to: http://www.FreeShortSaleSecrets.com
I hope this helps.
Cory
March 28th, 2007 at 11:07 am
Casey, take a look at my sub prime loans article - good reading for those with credit challenges.
March 29th, 2007 at 9:48 pm
“Here is list of CitiMortgage REO properties. Only 6 in California?? Things must not be THAT bad yet!”
There’s 38 now. A sweet 533% increase.