Thankx for the response. If the current owner has assets (which are in a living trust)and are already in default, are they better off to try to do a short sale? Does it matter how what the dollar difference is with regards to what the purchase price is versus what is owed on the property?
What are the tax implications with either proceeding with regards to a 1099 being issued by the mortgage company? If given the choice, which is the better way out on a property that is upsidedown in value vs amount owed to the lender?
Re: short sale vs foreclosure - Posted by Bill Jacobsen
Posted by Bill Jacobsen on July 25, 2007 at 10:30:18:
The answer is dependent on the state you are in and how you negotiate the short-sale and the goal and situation of the owners.
Your credit is generally better after a short sale than a foreclosure. The owner also has to decide whether they would rather have a deficency judgement or debt forgiveness which the IRS treats as income with the accompanying income tax liability. If the seller is insovent there will be no tax liability.
The owner usually has several options with a property as you described and should explore all before making a decision.
Does the IRS treat the judgement deficiency of a foreclosure as income? When you said if the seller is insolvent, there will be no tax liability, is that true for both a foreclosure and a short sale?