What are Short Sale Tax/Legal Implications? - Posted by Joe S

Real Estate Investing Real Estate Law
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Posted by BTI on April 14, 2009 at 10:17:28:

Joe

Have you asked the 2ND if they would consider taking a junior lien on your personal residence for the amount your short on the payoff.

If so get the first current and put it up for sale.

Not saying this is the best route to follow because there are many options but this would be cleaner than most and gets things under control and you can get on with your life. Plus if you used the money from this lender for your current residence it is a fair thing to do.

BTI

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What are Short Sale Tax/Legal Implications? - Posted by Joe S

Posted by Joe S on April 13, 2009 at 12:42:06:

Hello All…

I own 2 homes… living in one. I live in CA.

Having a terrible time selling or renting the vacant home. It’s now in foreclosure process, having gotten behind. I’m working with the mortgage company with a gov’t loan called Home Savers Advantage, whereby the gov’t loans you $ at 5% to cover the past amt due… in this case, about 3 months worth.

I owe about $230,000 on the first loan for this house, which has a mkt value of about $375,000.

Only problem is, there is a $200,000 bridge loan on it. Since the loan was taken out, the house values have declined and the house can no longer support a, in this case, $430,000 sales price. ($230 + $200)

If I try to short sell it (rather than taking the gov’t loan), it will be a short sale only for the 2nd lien holder because the $230,000 will easily be paid off. But the 2nd lien holder (bridge loan) won’t be fully covered by a sale price of $375,000.

So, apparently this would be a short sale only for the 2nd lien holder. Most of the bridge loan would be paid off, but not all.

In most cases, will the 2nd lien holder agree to a short sale? Would they “eat” the loss, or have me pay the remaining balance? From what I understand, they won’t transfer the security from the original property to another.

Also, what are the tax implications on a short sale, if any?

Thanks so much to all those far wiser than I.

Sincerely,
Joe