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I have read that on short sale if you were legally forgiven by bank part of your mortgage that you will be liable to IRS,this is considered a gift.
That is correct.
So many issues to consider when you walk away - tax issues, legal issues, credit issues. People think they are taking the easy way out by walking away? WRONG.
I see posts in support of walking away have mysteriously dried up when I mentioned the magic word deficiency judgement. Even in non-recourse states they could impact your credit so that a person can't buy a house for another 20 years.
Really - the OP or ANYONE considering foreclosure should seek out an attorney for advice, it's a life changing decision and one not to do based on internet advice from those who have, frankly, failed in life. As someone said, it's the option of last resort. The wrong decision can ruin your life until you die.
Under the Debtor Relief Act of 2007 - not 100% on the name - one;s primary home <---- critical can be exempted. Also, there is the existing relief if one is insolvent at the time. Basically what happens is the lender can give you a 1099 (the interest/dividends, etc. income statement) because the amount between the mortgage owed and the amount obtained (assuming a lesser amount as in a short sale) is considered forgiven debt which is treated as taxable income. In 2007, a provision which allowed you to fill out an IRS form (don't remember the number right now but it's on the IRS site) to get it waived. The two main provisions are that it be your primary home at the time or, that you be insolvent. There are accompanying worksheets to do the calculations needed. So, there are some circumstances under which the tax can be avoided. If it was an investment property, out of luck.
Really - the OP or ANYONE considering foreclosure should seek out an attorney for advice, it's a life changing decision and one not to do based on internet advice from those who have, frankly, failed in life. As someone said, it's the option of last resort. The wrong decision can ruin your life until you die.
To say that people giving advice on an internet forum that favor walking have failed in life is simply foolish. How do you know each individuals situation? The fact of the matter is that in MANY cases it is a wise financial decision to foreclose.
To say that people giving advice on an internet forum that favor walking have failed in life is simply foolish. How do you know each individuals situation? The fact of the matter is that in MANY cases it is a wise financial decision to foreclose.
That's true. A more accurate statement however might be to say that those who have advocated foreclosure in an internet forum have, themselves, been foreclosed upon and thus have a need (phycological/emotional, however you want to put it) to express to others that it is OK to walk away. In turn this would justify their own decision and also it would remove some of the social stigmatism they may feel.
So opinions might be biased. I'm not a banker or broker by the way, otherwise I would be just as biased.
edit - After consideration, I claim myself as a biased poster as well. Every foreclosure means that I as a taxpayer and consumer pay more for others that have foreclosed in terms of higher taxes, higher banking fees, less available credit, etc.
Last edited by Dd714; 02-18-2010 at 01:43 PM..
Reason: correction
That's true. A more accurate statement however might be to say that those who have advocated foreclosure in an internet forum have, themselves, been foreclosed upon and thus have a need (phycological/emotional, however you want to put it) to express to others that it is OK to walk away. In turn this would justify their own decision and also it would remove some of the social stigmatism they may feel.
So opinions might be biased. I'm not a banker or broker by the way, otherwise I would be just as biased.
Yes, I agree to that. However, perhaps they are sharing because they are very happy with their decision and would like to comfort others by telling them it is okay to walk away. For some people, foreclosure is not the last resort, simply the best option in what sometimes may be a very difficult decision/situation. I completely agree that you need to do your homework and go in with eyes wide open. However, that also goes with the decision of keeping the home. You then go with whatever works best in your situation. I do not at all agree with the attitude of "sticking it to the banks", trashing the place to maximize extra profits and other unhanded methods.
So opinions might be biased. I'm not a banker or broker by the way, otherwise I would be just as biased.
I can tell you that I am a banker and I do not feel that my posts have reflected any kind of bias whatsoever. As a banker it is my responsibility to advise my clients to operate in such a way that suits their best interests, and as I've stated even in this thread, there are some cases where Foreclosure is prudent. But I have also stated that Foreclosure is not a solution, it's what happens when all solutions fail.
I advocate responsible behavior on both sides of the arguement. There are consumers out there that were genuinely rooked by unscrupulous brokers, no doubt in my mind, I've seen them. BUT, for every one that I've seen that got rooked I've seen 5 that took a chance on something they maybe couldn't support long term..and sadly got burned. I don't mean to be harsh but if you go to Atlantic City and put your mortgage payment on red and lose, you can't cry foul to the Pit Boss unless you want to get tossed out on the Boardwalk.
So yes, have sympathy and empathize with the position that people have placed themselves in. But in a lot of cases (not all) the consumer brought this down on themself, bad decisions have consequence..that's life!
i bought house in 2004 for $400000 in vegas. 320000 on primary mortgage load 80000 in secondary loan in Wells fargo.
now house worth 180000. have more than 50K in credit card due + car loan, expenses. monthly due 1500 + living expenses + mortgage (2K)...
so for i'm not behind !!!
now i see the dark side ...
called wells fargo... since i'm not behind on payment... they are not ready to help.
should i stop making payment for 3 months then work with them or walk-away ?
i'm thinking of stop making payment and work on short sale. what you think?
are you aware of the AB149 mediation program it allows for you to go to mediation and hash out a deal (the lender has to show in good faith) in 4 hours. you are eligiable for this after the notice of default is filed with clark county and when you elect to do this program it places a hold on foreclosure!! but beware of the bank telling you you have to be delinquent this is not true unless your particular investor (diffrent from the lender) says so....that is the person or should i say entity that makes the rules for your loan! help is out there....there are free homeowner workshops all ove vegas i think i may know of one coming up.....i went to one where the host was a promident lawyer who has been practicing real estate law for 30+ years.
Just my 2 cents. I was current and going thru the modification process. I did find someone locally that is doing it for me and its has been way worth it so far, they kept telling me ( the bank) to go delinquent and I wouldnt, Im still current ad things are moving smoothly. So check all your options, I did do the same and in a Short sale, they can come after you and someother things. The right person can tell you everything to explore what u can do. Good Luck, bu it can be done. FYI
Or waiting it out if you have the means because Vegas is still one of the biggest growth markets in the country. If the investment was wise before, it probably still is.
An analogy for you. One share of Goldman Sachs prior to the financial crisis trade for around $120 per share and was a solid investment. At it's lowest point around Dec '08 it bottomed out around $65, today it opened at $152. The moment you sell that asset, and remember despite the emotional attachment it is still an asset, it goes from a paper loss to an actual loss.
I know it's aggravating to make payments on an asset that is upside down, just like it was maddening to continue to contribute to you 401k during the slide, but remember that all things are cyclical, it will be back.
You selectively pick a stock for comparison? Instead of GS, why not choose GM which went bankrupt. Or why don't to you mention that GS was trading at $250 before it dropped to $65? You are suggesting that this guy hold onto $400K mortgage for a liability worth 180K? Moderator cut: Personal attack The fact of the matter is that the bank, not the OP, made the bet that his house is worth $400K. If the OP can't or doesn't want to pay the mortgage, then the bank gets the house as stipulated in the contract. Fair is fair.
Last edited by Green Irish Eyes; 02-20-2010 at 04:03 PM..
Reason: Deleted personal attack
You selectively pick a stock for comparison? Instead of GS, why not choose GM which went bankrupt. Or why don't to you mention that GS was trading at $250 before it dropped to $65? You are suggesting that this guy hold onto $400K mortgage for a liability worth 180K? Moderator cut: Personal attack The fact of the matter is that the bank, not the OP, made the bet that his house is worth $400K. If the OP can't or doesn't want to pay the mortgage, then the bank gets the house as stipulated in the contract. Fair is fair.
OK, enough with the cable news regurgetation ok? The facts are that the open market bears out the cost of housing, period. Homes and commodities in general are only worth what people will pay for them, text book 11th grade economics, remember "supply and demand"?
As for selective stock picks, c'mon man, recognize an analogy. We could go back and forth all day with gems and busts, the point is that investments are risky, and free market economies are cyclical. That's it.
This "crisis" we're experiencing now is not by any stretch a recent development, it's been a long time coming. And blame can be spread around to all corners of the financial AND political landscape going back 25+ years. Bad Regulations + Big Business + Bad Consumer Decisions = BIG MESS.
The only innocents in this thing are people like the OP. Bought his home because he could afford it, when he could afford it, and has continued to satisfy his obligations..and he should be APPLAUDED for it! To encourage him to stray from that path unless he has to is irresponsible and shortsighted.
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