Short sale and you got what in the mail ?

By
Real Estate Broker/Owner with Get You Moved Realty

 Lately I have been hearing horror stories of people that have sold their home via short sale or gave the Home back to the bank "deed in lieu of foreclosure" or any solution to relieve part of the debt other than total repayment to the bank has been considered taxable income.

One of my old builders called me and asked me how business was going and what the interest rates were at.    After some small talk he got right into telling me about the $130,000.00 1099 form he just received from a mortgage company that borrowed him money on a property.

I recently received an e-mail from the National Association of REALTORS and they have started to take steps and have gained backing to sponsor a bill that would not tax any debt foregiveness on a primary home.

Please feel free to comment on this subject and always feel free to call me with any questions you may have.

Mike Nehmzow

Get You Moved Realty

763-742-7653

Posted by

Michael & Tammy Nehmzow Broker/Owners of Get You Moved Realty 

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Mike Nehmzow RDC PRO

Comments (1)

Brad & Traci Brusenhan
Brusenhan & Associates Realty - Dallas, Texas - Plano, TX

If it hasn't happened already, legislation will do away with the 1099 issue as it relates to forgiven debt on mortgages.  it is a joke.  It is about the same as the IRS sending me a bill because they believe I had the "potential" to earn more than I actually did.

I work almost exclusively in the distressed mortgage / short sale side of the real estate business.  In late 2007 and early 2008, I was seeing the notice of 1099 stated directly in our approval letters from the banks.  I haven't seen that in the last 7-8 months much at all.

Worst case scenario is that the borrower obtains the short sale package from their and sends it to the IRS with updated financials and get's it either entirely dropped or dramatically reduced.  Most folks are only paying a small portion of taxes on the entire debt anyway.  I know money is money, but if you are the rare person to get stuck with a 1099 for $35k and then you negotiate it down 50%, you may end up paying 10% on $17,500.  I'd pay $1,750 bucks to keep that foreclosure off of my credit report every time.

Regards,
Brad Brusenhan

 

Jan 08, 2009 08:16 AM