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Bank owned and Short Sale properties in Coloroado Springs/El Paso County

By
Real Estate Agent with RE/MAX Advantage

I have people ask me all the time, what is the difference between a short-sale and a bank-owned property? So, I will first answer that question, hopefully in simple terms.

 

Short Sale- This is where you are trying to sell your home for less than you owe the bank and the bank must agree to take less (short) of your loan amount.

For Example, let's say you owe $200,000 on your home and you can only sell it for $190,000 in this market, or that is all you will be able to pay the bank after all of the costs, etc... Then, the bank must agree to let you sell and only pay them the $190,000, thus forgiving the $10,000. You will most likely get a 1099 for the forgiven amount (please talk to your accountant or attorney if considering this for tax ramifications)

Bank-owned- This is where you have not made your payments, the home has gone through the lenghty foreclosure process and has foreclosed. The bank owns the property.

CURRENTLY IN EL PASO COUNTY LISTED ON THE MLS AS OF JAN. 7, 2009:

BANK OWNED PROPERTIES-296

SHORT-SALE PROPERTIES- 312 (note, not all of the properties may be listed as short sale)

This number changes daily.

It is a great time to get investment property. If you would like to know more, please contact me at 719-459-5468

Kristi DeFazio

RE/MAX Advantage Colorado Springs

www.kristidefazio.com

kristidefazio@remax.net

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Kristi DeFazio is a Realtor in Colorado Springs

Call for a free market analysis of  your home or set up a listing search with a webpage, tailored to meet your needs.

If you are looking to buy or sell real estate in Colorado Springs or the surrounding areas, give Kristi a call today.

Kristi DeFazio

RE/MAX Advantage

719-459-5468

kristidefazio@remax.net

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Show All Comments
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

"Then, the bank must agree to let you sell and only pay them the $190,000, thus forgiving the $10,000. You will most likely get a 1099 for the forgiven amount (please talk to your accountant or attorney if considering this for tax ramifications."

Hey Kristi I wanted to let you know that neither of these statements are accurate. The bank doesn't have to agree to do anything. They could ask the seller to repay the balance owed as well. As far as the forgiven amount the seller will not get a 1099 as there was a bill passed that addressed this exact subject allowing the seller not be taxed on the short fall. Just thought you may want to re-phrase what you wrote:)

Jan 08, 2009 01:41 PM
Kristi DeFazio
RE/MAX Advantage - Colorado Springs, CO
Colorado Springs Rea lEstate 719-459-5468

Bill, Yes I am aware of the bill that was passed, but my sellers were told that they could still get a 1099 on the short fall because it was not the original loan. It was the second loan. So, yes, I think that they will not get a 1099 if it was the original loan on the home but I was told if refinanced or a 2nd, it could possibly still apply.

You are right about the wording on the first part- the bank doesn't have to agree they can ask for re-payment and I have seen this as well. I was trying to make it too simple and didn't explain that part. Thanks for catching!

Jan 08, 2009 02:13 PM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Kristi you welcome on the repayment part. As far as the the part about getting a 1099 because it is not the original loan here is the answer:

What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.

Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.

Jan 08, 2009 02:31 PM
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