Posted by Bill Jacobsen on October 15, 2007 at 10:11:59:
The money is still owed by the seller to the bank. The bank can choose to forgive it. If they do, that is considered income by the IRS. The bank may issue a 1099 to formalize the forgiveness of debt. In either case it is supposed to be reported by the seller. Taxes may not have to be paid if the seller is insolvent.
Bill
Short Sales - Posted by Kimberley Hines
Posted by Kimberley Hines on October 13, 2007 at 18:35:27:
Hello
I wanted to know how a Short sales really works from a Buyer and Seller perspective.
I was told that if you are purchasing real estate in a short sale that the buyer is responsible for the balance still owing to the bank. This does not make sense to me.
Example: If there is a home that is valued at 300k and there is still 200k owing on the home that is in pre forclousure status and you as the buyer makes a deal to purchase this home at 100k that the buyer is issued a 1099 to pay taxes on the remailing 100k that is still owed to the origional lender.
Is this true?
Re: Short Sales - Posted by Bill Jacobsen
Posted by Bill Jacobsen on October 15, 2007 at 10:13:18:
The money is still owed by the seller to the bank. The bank can choose to forgive it. If they do, that is considered income by the IRS. The bank may issue a 1099 to formalize the forgiveness of debt. In either case it is supposed to be reported by the seller to the IRS. Taxes may not have to be paid if the seller is insolvent.
Bill