Uncategorized

Short sale without missing payments/being late?

0
2 years ago
by admin in

There is a misconception out there that banks won’t approve a short sale if the homeowner is not late on payments.

True, a lot of short sales will have some delinquent payment history in them, but there can be hardships that won’t cause payments to be missed during the short sale process.

Here are some reasons of hardship that will allow a short sale to be approved without being late:

  1. Loss of job
  2. Job transfer
  3. Medical reasons
  4. Military personnel being relocated
  5. Divorce

Keep in mind that some of these reasons may not be a financial hardship, so if there are other assets, the lender may require a cash contribution, a promissory note, etc.

Related Blogs

  • Related Blogs on delinquent

Foreclosure and short sale tax liability

0
2 years ago
by admin in

If you are going to choose between a short sale or foreclosure you need to understand the tax liabilities of your decision. There is going to be a certain amount of cancelled debt in either scenario.

You should consult a CPA and/or tax attorney.

The following is general knowledge

  1. The lender will issue a 1099-C in a short sale (unless they pursue a deficiency judgment); C is for cancelled.
  2. The lender will issue a 1099-A in a foreclosure (unless they pursue a deficiency judgment); A is for abandoned.
  3. The 1099 issued is for the amount of the lenders loss from the short sale or foreclosure.
  4. The loss is almost always less in a short sale since there is additional cost when the bank forecloses and then has to sell the property. Short sales typically yield a higher purchase price and a lower loss to the lender.
  5. The homeowner may not be liable to pay taxes owed the IRS on the 1099 in either case with IRS Tax Form 982 (http://www.irs.gov/irs/article/0,,id=179073,00.html).
  6. The homeowner may not be liable to pay taxes owed the IRS per the Mortgage Debt Relief Act (MDRA) (http://www.irs.gov/individuals/article/0,,id=179414,00.html).
  7. State tax law regarding 1099’s on short sales and foreclosures is not necessarily in line with federal tax law.
  8. Generally speaking you won’t owe the IRS taxes on the 1099-C if you acquired the home with a purchase money loan (vs refinance loan)

Related Blogs

Short sale reported as foreclosure on credit report

0
2 years ago
by admin in

Quite few people go through the process of a short sale of their home, but then the lender(s) will report it as a short sale on their credit report!

 If a short sale is not reported accurately on your credit report then the account should be deleted per the FCRA (Fair Credit Reporting Act)

True, a short sale is less damaging to credit than a foreclosure but, unfortunately, short sale information isn’t accurately reported on people’s credit reports.  Short sale reporting per se isn’t what destroys FICO scores, rather its the mortgage late payments that most homeowners have when they do a short sale that hurts their credit. A 90-120 day late payment on a mortgage account negatively affects FICO scores almost as much as a foreclosure. And, late payments negatively affect the opinion of an underwriter evaluating an applicant for new credit.

Starting over is proving to be very difficult in this climate. But, the good news is that the law is on the side of consumers. Inaccurately or erroniously reported accounts can, and should be, removed from credit. 

Removing foreclosures or short sales from credit can be done legally in 6 easy steps. We want people to get a fresh start and not be needlessly hurt by inaccurate credit reporting.

Related Reading:

Go to Top