If the bank said they alow short sale, but they still n
Submitted by yanguqin
from CA
- 10/23/2008 - 11:07pm
I am short selling my 4 unit non-owner occupy refinance property. the 2nd loan lender said they can approve the short sale, but they still need ask me to pay back the rest money I own them. The short sale is not settlment. In this case, should I agree to short sale and allow them to recouse the money in the future or just allow the 1st lender to foreclosure it. What is the diffenert between foreclosure and short sale without settlment in tax issue?
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This isn't really a "tax" issue. It is a repayment issue. Since the property is not owner occupied the 2nd lien holder does have the right to pursue their debt against you, even if they lose their secured interest in the property when the 1st forecloses.
I'd still recommend a short sale. You will likely get more for the property by actively marketing it for sale, and ultimately it is your money that is at risk.
Alternatively you could bring the first current, and hopefully force the 2nd to foreclose. By foreclosing the 2nd gives up their right to pursue a deficiency judgement against you (unless they choose judicial foreclosure which is very rare). It is quite possible that the 2nd will just sit tight, and accrue interest, late fees, etc. But if you can cover the first with rents, this may be worth consideration.
yanguqin,
I'm curious about the "tax" issue. If you have not consulted 2-4 CPS or tax attorneys on this...I'd be very concerned for you...You probably have everything worked out with the IRS for capital gains, depreciation recapture and 1099's for income if you pulled money out in a refi...
What you are speaking of is the potential for the lender to try and collect your debt if you foreclose and get you to pay the debt if you do a short sale...If you agree, you agree to pay it back. If you foreclose then they have to chase you for a few years...if a person had no money, was self employed, disabled, retired...it would be hard to collect from that person. If a person had a W2 job, money in the bank then maybe an agreed upon deal with a short sale could work in their favor.
Dan Rogers
Reliance Realty Group
408-821-2250
We always suggest that you consult with a real estate attorney on these issues. Many of the second lien holders are selling these notes to collection agencies after the first lien holder forecloses. They can have up to 4 years to collect. This is why many homeowners prefer to short sale their properties. It allows them to negotiate up front any repayment terms if they cannot get a full satisfaction release. If you choose not to short sale the property and you are not filing bankruptcy you may want to contact the 2nd and negotiate with them on the repayment. Oftentimes they will settle for cents on the dollar and then you don't have to live in fear of them rearing their heads in the future. Even if you can't strike a deal with them at least you can show that you tried. No one knows what future legislation may look like on this issue. The key is to not ignore the problem.
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