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My bank was great- I negotiated directly with them. The paperwork/letter clearly demonstrated how upside down I was and they said they would charge off the deficiency ($50K in mortgage/sale price plus $60K in closing costs). 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.
House closed on Friday. I'm now realizing that I'm better off having them charge off the deficiency and taking the credit ding. It would take me 15 years to pay them back with the interest--- I can overcome my credit ding a lot faster and rebuild my retirement and savings.
Wondering how I do the above: should I just default (via not paying for 2 months) or should I call my bank and said that I've changed my mind (that sounds so lame)? I know the bank has some control over how my credit is reported so I want to do the smartest thing.
Another issue is that of the tax implication. I moved out of the house (in Florida) several months ago when I accepted a job back in SC. I'm obviously renting now. Considering the amount of interest I paid on the house in 2007 (a disgusting $48K) and the taxes ($11K), I've got some great deductions. Thus it would likely make sense for me to get the bank to charge off the $110K short sale deficiency before the end of 2007 because I'm going to have to pay tax on it, right? And my $60K deductions will help.
This has been the worst experience of my life and I'm ready to move on. The "right thing" of paying them back for the next decade and a half gets thrown out when I look at this from a purely business perspective.
Thanks for any advice. Even if you can tell me which professional I should talk to: a tax accountant or a tax attorney. Yeah, and a shrink to help with the mental anguish!
You say that your bank has been great to work with up to this point. May I ask why you'd even consider not talking to them about the outstanding balance ($110k) repayment? You need to sit down with the bank and go over your situation and come up with a decision.
I would suggest talking to a tax attorney about your other questions. You might decide to consult a tax attorney first, and then meet with the bank. Might even be a good idea to bring your tax attorney with you when you sit down with the bank.
Best of luck to you. Keep your chin up and move forward. Just do so intelligently and don't burn bridges that you may later need.
Tax attorney - first thing tomorrow. Ideally, this is the person you consulted BEFORE you finalized the deal with the bank, but from your post, it sounds like you might not have consulted a professional yet.
Thanks, Snake. My bank is actually in Memphis so I'm not able to sit down face to face, which I would much prefer. I'll find a tax attorney tomorrow and begin the next step of what will likely be a long journey to recovery.
If the bank forgave your debt, you're going to have tax liabilities. If you don't pay it, the IRS will tack on penalties and interest and you're going to be right back in a financial hole. A really good tax attorney is your best bet.
paddlin
the one thing that wasn't mentioned is if you default the mortgage company can go after a judgment. This is more than just a "ding" This can affect you for many years, depending on the state laws they can be renewed for up to 20 years.
As others suggested talk to the bank and also find out the tax liabilities.
Thanks, Snake. My bank is actually in Memphis so I'm not able to sit down face to face, which I would much prefer. I'll find a tax attorney tomorrow and begin the next step of what will likely be a long journey to recovery.
Paddlin, that sounds like a very wise move. The bank is definitely not your enemy, so keep them in the loop. They want to find a solution just as much as you do.
You'll get through this and emerge a stronger and wiser person. Just remember to apply what you've learned the next time around and you'll do better than ever. Best wishes.
the one thing that wasn't mentioned is if you default the mortgage company can go after a judgment. This is more than just a "ding" This can affect you for many years, depending on the state laws they can be renewed for up to 20 years.
Excellent point! The Bank can obtain a personal judgment against you. Meaning they can do things like garnish your paycheck and other assets. Be very very careful. Get very very good legal advice. If you reach some "agreement" with them, make sure to get every word of it in writing.
Hold on a minute -- for all the folks saying the bank can sue, etc . . . it was a short sale, correct? The bank approved that. They want to clear this mess from their books as much as paddlin did from him/herself. That is typically where this type action ends, correct? (I do not know in practice -- never involved in one).
But the part the Paddlin did not learn from the experience was why not to talk big and do little. Same thing that started the mess to begin with. Talked smack, was going to manage a big debt castle, but did little.
Not dogging you for that, just calling the play as it was made. If you learned from that, it could have, should have been in the past. But here is the sad part --
"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 am thinking some serious tuition might help you learn something from this. You might need to be broke paying for a while to learn something from this. Before you dismiss this, consider the life lessons you do not learn you must repeat (and repeat and repeat and . . . .) Might save you from doing some really stupid stuff later.
Hold on a minute -- for all the folks saying the bank can sue, etc . . . it was a short sale, correct? The bank approved that. They want to clear this mess from their books as much as paddlin did from him/herself. That is typically where this type action ends, correct? (I do not know in practice -- never involved in one).
In a "normal" short sale yes, but if the OP agrees to repay the "shorted" amount and you bet they are going to have him sign papers agreeing to this. Then he "defaults" yup they will go after him.
Not to mention that the "short sale" will be on his credit also any payments that were over 31 days late.
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