Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
What kind of credit ding would you get for making a short sale? It's a valid sale approved by the bank; you are not defaulting or foreclosed or anything like that. It shouldn't have any negative effect on your credit score. What type of paperwork did you sign w/the bank? You seriously need to get in touch w/a real estate attorney ASAP to review the documentation and see what's going on. BTW, if the bank forgives a $110k debt on the sale of the house, you will still receive a tax bill from the IRS at the end of the year showing a $110,000 earned income for the year on top of whatever you earned on your own. If you're in the 25% tax bracket, that's a $27,500 tax bill!
Of course, it should have an effect on your credit score! If a person does not perform as promised on a legally binding financial document, a credit report should reflect that. Otherwise, what's the point in having credit scores at all?
And if the bank forgives $110K for one loanholder and not another, then one received a same-as-cash giveback. That's taxable. A reduced $27,500 is four times better than $110K, so the borrower receiving preferential treatment should be grateful, not looking for more. It is preferential treatment, since the bank isn't letting everybody short sale their property. A lot of borrowers would welcome that opportunity, but it isn't always forthcoming.
So, yes, forgiven debt should be a big ding on the remiss borrower's credit report and the forgiven amount should be taxed. Actions have repercussions, and it's way past time people start remembering that. If there are no repercussions, everybody's going to want the bank to give them a little something for nothing and there's just not enough of that to go around.
"However, I asked the bank to allow me to repay the $110K because of my strong ethics and desire to keep my high credit score. They agreed."
So who you going to blame but yourself for this mess? You just keep returning, appears to be driven by some sort of self-vanity? (again not dogging you), just seem to dive right back into the mess you are getting out of.
I was thinking the same. The OP would have been better letting them forclose on the property. Yeah it would have dinged the credit score, but if they are going to go back on the deal to repay the short amount, what difference would it have made.
Also a forclosure wouldnt involve paying tax payments for forgiveness of debt.
In this case, they probably did more harm then good.
What kind of credit ding would you get for making a short sale? It's a valid sale approved by the bank; you are not defaulting or foreclosed or anything like that. It shouldn't have any negative effect on your credit score. What type of paperwork did you sign w/the bank? You seriously need to get in touch w/a real estate attorney ASAP to review the documentation and see what's going on. BTW, if the bank forgives a $110k debt on the sale of the house, you will still receive a tax bill from the IRS at the end of the year showing a $110,000 earned income for the year on top of whatever you earned on your own. If you're in the 25% tax bracket, that's a $27,500 tax bill!
Dude,
Did you not watch the news, Ole' Bush and congress just passed a law to NOT charge you tax on the forgiven debt, and no I'm not making it up! It's almost like they are begging people to short sale their homes. That's great for the home seller, bad for the banks and tax payers.
Man is there anything this government can't screw up???
Did you not watch the news, Ole' Bush and congress just passed a law to NOT charge you tax on the forgiven debt, and no I'm not making it up! It's almost like they are begging people to short sale their homes. That's great for the home seller, bad for the banks and tax payers.
Man is there anything this government can't screw up???
I'm with you, Tony! Nice to know that ole sense of fair play is alive and well!
Did you not watch the news, Ole' Bush and congress just passed a law to NOT charge you tax on the forgiven debt, and no I'm not making it up! It's almost like they are begging people to short sale their homes. That's great for the home seller, bad for the banks and tax payers.
Man is there anything this government can't screw up???
I was scratching my head with that one to. Where is my tax forgiveness for paying off my property and then selling it for more then I paid for it? This is like playing the lottery, if you lose you get your money back.
Did you not watch the news, Ole' Bush and congress just passed a law to NOT charge you tax on the forgiven debt, and no I'm not making it up! It's almost like they are begging people to short sale their homes. That's great for the home seller, bad for the banks and tax payers.
Man is there anything this government can't screw up???
The original poster already sold her house though, so the new law won't apply to her retroactively.
I was thinking the same. The OP would have been better letting them forclose on the property. Yeah it would have dinged the credit score, but if they are going to go back on the deal to repay the short amount, what difference would it have made.
Also a forclosure wouldnt involve paying tax payments for forgiveness of debt.
In this case, they probably did more harm then good.
You bring up an interesting point. I would like to know the differences between a short sale and a foreclosure on a person's credit report. I would assume that a short sale would be better than a foreclosure, but I'm not sure of that.
Foreclosure is much worse if its reported as that. Usually a short sale shows up as "settled for reduced amount" or something, same as when you pay a credit card less than was owed. It hurts credit, especially if you were 30+ days late before (I have seen short sales with 0 late payments, owner just knew they couldn't sell it without a huge loss).
A foreclosure can bar you from owning a home under many programs for 2-3 years, whereas with a short sale you can hopefully rebuild credit in 1-2. Small difference that can have a large impact.
As for the tax implications, you need to look into that. The FHA Secure program and some other recent laws are retroactive to clients that had problems starting in late 2006. So the tax relief may apply to someone that sold a few months ago, or it may not. Consult with a tax pro that is up to date on the news to make sure.
Not being able to buy a home for 2-3 years (realistically, 2 at the most) is a very small price to pay for being party to a foreclosure. Perhaps if the penalties were more stringent, people would think twice before giving in to greed or making irresponsible financial decisions. Really, 2 years is a joke, especially when the tax implications are forgiven. People will take that in a heartbeat to get out from under a property that they never should have bought. And what's to stop them from turning right around and doing it again, given the opportunity?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
