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As I understand... foreclosure and the bank sells less than you owe... guess what? YOU PAY THE REST... short sale, you sell for less than you owe.. the banks eats the cost... so when you tell me that a foreclosure is the same as a short sale.. B.S.
There is no perfect answer to this situation for anyone, but typically a short sale is better off than a foreclosure. The seller is asking the bank to eat a large some of money of course there are going to be negative consequences.
Not sure what your point is? Are you saying someone would benefit from going into foreclosure vs. doing a short sale.
Point was to dispute parts of the article and to let potential short sellers know that they can be negatively impacted by a short sale. It probably is worth a try, but still not a great option.
As a lender I despise short sales because the process sucks so bad for buyers. I also despise that fact that many potential short sellers try to 'work the system'.
As I understand... foreclosure and the bank sells less than you owe... guess what? YOU PAY THE REST... short sale, you sell for less than you owe.. the banks eats the cost... so when you tell me that a foreclosure is the same as a short sale.. B.S.
In most instances the borrowers do not 'pay the rest' on a foreclosure. Many states are non-recourse, deficeincy judgments are not often pursued in the states that aren't and in the fairly rare occasion where the lender does pursue the deficeincy, the borrower can often file bankruptcy.
So, typically the bank gets the house and that's it.
In most instances the borrowers do not 'pay the rest' on a foreclosure. Many states are non-recourse, deficeincy judgments are not often pursued in the states that aren't and in the fairly rare occasion where the lender does pursue the deficeincy, the borrower can often file bankruptcy.
So, typically the bank gets the house and that's it.
Even if they don't pursue a deficiency judgment, they will still send you a 1099 and knowing that foreclosure sell less than short sales, that means you get a larger 1099 for the tax man... so that's not exactly "that's it"... albeit there is a legislative law that exempts all foreclosures from 1099 taxes but its about to end next year... sure you could file for bankruptcy but that is not without its own cost in money as well as credit... bankruptcy lawyers don't work for pro-bono...
Even if they don't pursue a deficiency judgment, they will still send you a 1099 and knowing that foreclosure sell less than short sales, that means you get a larger 1099 for the tax man... so that's not exactly "that's it"... albeit there is a legislative law that exempts all foreclosures from 1099 taxes but its about to end next year... sure you could file for bankruptcy but that is not without its own cost in money as well as credit... bankruptcy lawyers don't work for pro-bono...
This is drastically different than "YOU PAY THE REST". And why would a foreclosure sell for much less than a short sale? Wouldn't they both sell for about market value?
Last edited by manderly6; 05-28-2010 at 01:09 PM..
You don't seem to understand manderly6, they CAN file a deficiency judgment against you that makes you PAY THE REST... just because it isn't common does NOT mean they don't do it (they probably look at the deficiency and the previous owner's assets to determine if it is even worthwhile... for instance suing a bum for 60k is a waste of time)... typically foreclosures are bad to have because they take a long time to sell to the public (hence they try to unload it quickly to investors/savvy buyers) and on a national average they sell for 50% less than the loan... whereas short sales typically sell for 30% less than the loan on average... Foreclosures or short sales selling for market value? If you are paying market value, you are either being ripped off or there is an unusual high demand for that property (which is not common)...
You don't seem to understand manderly6, they CAN file a deficiency judgment against you that makes you PAY THE REST... just because it isn't common does NOT mean they don't do it (they probably look at the deficiency and the previous owner's assets to determine if it is even worthwhile... for instance suing a bum for 60k is a waste of time)... typically foreclosures are bad to have because they take a long time to sell to the public (hence they try to unload it quickly to investors/savvy buyers) and on a national average they sell for 50% less than the loan... whereas short sales typically sell for 30% less than the loan on average... Foreclosures or short sales selling for market value? If you are paying market value, you are either being ripped off or there is an unusual high demand for that property (which is not common)...
It depends on where the property is located. As mentioned, some states (such as AZ), are non-recourse, so they can't come after you. I'm sure it's done in other states, but each seller should review their situation with a lawyer and tax professional to determine the pros and cons of short selling vs going to foreclosure.
In areas where short sales and foreclosures are common, they set the market value. Banks will consider market value when setting their list price. They also want to maximize their return.
Even if they don't pursue a deficiency judgment, they will still send you a 1099 and knowing that foreclosure sell less than short sales, that means you get a larger 1099 for the tax man... so that's not exactly "that's it"... albeit there is a legislative law that exempts all foreclosures from 1099 taxes but its about to end next year... sure you could file for bankruptcy but that is not without its own cost in money as well as credit... bankruptcy lawyers don't work for pro-bono...
Quote:
albeit there is a legislative law that exempts all foreclosures from 1099 taxes but its about to end next year...
exactly.
We are not talking about people doing this years in the future. Hopefully after the dust settles I will never hear the words 'short sale' again. Unfortunately people will rely on this method probably forever now.
You don't seem to understand manderly6, they CAN file a deficiency judgment against you that makes you PAY THE REST... just because it isn't common does NOT mean they don't do it (they probably look at the deficiency and the previous owner's assets to determine if it is even worthwhile... for instance suing a bum for 60k is a waste of time)... typically foreclosures are bad to have because they take a long time to sell to the public (hence they try to unload it quickly to investors/savvy buyers) and on a national average they sell for 50% less than the loan... whereas short sales typically sell for 30% less than the loan on average... Foreclosures or short sales selling for market value? If you are paying market value, you are either being ripped off or there is an unusual high demand for that property (which is not common)...
In many states, the lender CANNOT pursue any deficeincy judgment.
In many states, the lender CANNOT pursue any deficeincy judgment.
Even if they can't file deficiency, they have to file a 1099... and if someone foreclosed, they probably have difficulty paying federal taxes on that (which in all likelihood will average much higher than a short sale).. albeit there is a law that forgives 1099s on short sale/foreclosure right now but it will expire next year...
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