Hi folks. Richard Zaretsky wrote a great post yesterday titled "Back to Basics...a Review on Short Sales". If you haven't read it please take a few minutes to do so. It is a very good perspective on Short Sales from an Attorney.
Richard's post brought up two very good points for me. Both were light bulb moments.
The first was the 1099 "thingie". Whether you receive a 1099, or not, has no bearing on whether you have income to declare. Well...duh!!! Why would it. All a 1099 does is reports the income to the IRS for you. If it's not done for you....it is still YOUR obligation to report it. A perfect example of this is the way Title Companies, at least in Florida, handle our commissions. They are not required to 1099 me for commissions paid....BUT...I still have to claim the income. So wouldn't the Seller have the same obligation? They certainly may not have to pay any taxes BUT they would still have to claim the income.
The second light bulb moment was the promissory note. Some lenders will require the Seller to sign a promissory note for all of the "short" or part of it. So my thought was, why not sign it if the alternative is a foreclosure? What difference does it make? You would go from having a foreclosure on your credit to having a "no pay" promissory note.
I had a Seller, several months ago, whose property was foreclosed on. She owed $270,000 on a property worth about $139,000. We attempted to get a short sale acceptance at $130,000. The lender agreed assuming the Seller would sign a note for $140,000. I was able to negotiate the note down to $40,000. The Seller's attorney advised her not to sign it and to just let the property go into foreclosure, which it did. By the way, the note would have been interest free and for 15 years.
Was this a mistake? After reading Richard's post I believe it was.
My plan in the future is to just send these Sellers over to Richard. I'll let him handle the heavy lifting. That way I can concentrate on listing and selling. All this other stuff is just more than I need to know. What say you?
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