To walk away or stay? (Jupiter, Stuart: sale, renting, HOA fees)

[stevep111]

I had a neighbor across the street who walked away from their home. They stopped paying their Mortgage and bills and just before the bank threw them out they paid cash for another house and left the old one to rot. The house was worth about $250k at it's highest and now I hear from prospective buyers that they may get it at auction soon for $45k.

For my money the bank should still be able to go after the former owners. In fact a couple of weekends ago we were out yard saleing and ran into them at their own yard sale. They don't seem to be doing that bad in their new home.

[taratara1111]

I moved to PSL back in 2006 from Palm Beach County. I wanted a change. My monthly mortgage payment is $1,200.00 coupled with my HOA monthly fees of $300. It is crazy to pay $1,500 a month for a condo. So many people are foreclosing on their homes in PSL, not to say it is the right thing to do. Moving to PSL was a mistake, for me personally. Morally, I don't think it is the right thing to do but financially it is. I guess I am just joining the crowd of all the other people living rent free right now.

[FlaLadyB]

well.. you already had your say on another thread.. and we answered you. What you are doing it not right for the economy or the rest of us that are essentially bailing you out by paying the bills we signed up for. Sorry you feel the need to gloat about not paying yours

[stevep111]

You mean the Moraly Bankrupt club?

[Synergy1]

I relly do feel bad for those homeowners who cannot currently afford their homes. However, I also believe it is morally wrong to believe others should pay for your mistakes.

Homeowners who leave their homes because they cannot afford them would receive a 1040 from the IRS stating that the amount they are leaving for others to pay will be attached to their taxes as income for that year. So, if the home is in debt for $250,000 and it goes to forclosure and sells for $150,000 then the homeowner who forced foreclosure will get a 1040 for $100,000. If they earned $50,000 for that year then they will be liable for $150,000 in taxes.... My former neighbor refied for $280,000 and left the state. He pocked $180,000 and I hope the IRS caught up with him now. His SSN will follow him forever as with your proposed bailout...

He should be jailed and if you believe you can rely on athe faith and truthful approach of others to get you through then you should also get in trouble with he IRS...

Originally Posted by taratara1111

Hi everyone. Now, I think I may become one of them. It will probably take a year to foreclose on my condo. In that time, I can save up quite a bit of money. Yes, it is morally wrong but soooo many people are doing it. I rather just save up money and then rent for a very long time. I know a few people that have declared bankruptcy and were still able to rent. I know I could refinance but this is so lucrative. I regret moving to Port St Lucie and never planned on walking away but bankruptcy has become so commonplace.

[FlaLadyB]

Synergy, if the IRS did a lien on him, and they will, it will follow him where ever he goes. That's one good thing following that trick.

Not all foreclosures or short sales receive a 1040 form as taxable income on the difference from what the home sells for and the owed amount. Each bank (lien holder) has their own way of dealing with what is owed to them and there is no way for foreseeing what that will be.

[JerseyEstate]

Originally Posted by Synergy1

........

So, if the home is in debt for $250,000 and it goes to forclosure and sells for $150,000 then the homeowner who forced foreclosure will get a 1040 for $100,000. If they earned $50,000 for that year then they will be liable for $150,000 in taxes.... My former neighbor refied for $280,000 and left the state. He pocked $180,000 and I hope the IRS caught up with him now. His SSN will follow him forever as with your proposed bailout...

He should be jailed and if you believe you can rely on athe faith and truthful approach of others to get you through then you should also get in trouble with he IRS...

IF applicable, the IRS would send a Form 1099-C, not 1040. And if there was any debt cancellation, the tax could be due on the amount of the cancellation. In your example above, they wouldn't necessarily pay $150,000 in taxes. They could be liable for taxes on income of $150,000.

I use the words "could" and "would" and "if" intentionally because the tax laws are complicated and ever-changing. Very important to speak with a tax professional.

For sure though, as FlaLadyB said, if the lender doesn't prepare and send the form, no tax is due.

[G711]

Does anybody actually know someone that this has happened to???
With the millions of foreclosures I dought the IRS would have time to pursue all of them. Forclosure laws are different in every state as to what the recourse the lending agency has, most to my understanding allow for them to go after a judgement for the difference of sale if any. Which most banks are not pursueing as there are to many to have to take each one to court to receive a judgement which is pretty much worthless.
The pure fact is hundreds of millions of people default on car loans, medical expences, home loans ect. each year including some of the Banks that were bailed out. Its unforturate but it happens.
It would be nice to hear a tax attorneys view on this subject.

[HonestOne1]

Originally Posted by taratara1111

Yes, it is morally wrong but soooo many people are doing it.

Kinda answered your own question there.

And yes I know several people in "deficiency judgement" states like Florida who are being pursued by the IRS and receiving lawsuits from the lenders. I have a cousin in Miami who stupidly purchased 5 condo's in 2005 on speculation, and he will most likely be paying the IRS for the rest of his life.

And no, "not everyone" is doing it. When this mess is over, you will have 10 to 15% of the US population who will have walked away from their homes. That 10 to 15% segment of the population needs to move back into mom and dad's basement where they belong, and at that point we will start to see a slow recovery. Bailing them out or letting them declare bankruptcy to avoid deficiency judgement or 1099 is only prolonging the inevitable.

You have to let stupid people fail or you will have an entire country of stupid people.

[taratara1111]

interesting article that reaffirms my decision...

Chart: Owing more than home is worth - USATODAY.com