Everyone loses in a foreclosure. The banks generally received more than 20%
less on the sale of a foreclosed property than they would receive in a short
sale. This is prompting many banks to provide incentives of up to $30k to
distressed homeowners to complete a short sale.
The homeowner loses in a foreclosure because they are
sometimes responsible for the difference between the auction price and the
amount owing on the mortgage. In a
recourse state the lender will most likely pursue the homeowner for the
difference. In a non-recourse state the
first position lien holder won’t pursue but the second mortgage holder
may. Regardless you may receive a 1099
for the amount of the difference.
So it may really be worthwhile to consider a short sale.
NOTICE: The information provided is for general reference only and is not to be construed as tax or legal advice. Consult your income tax preparer and/or attorney for specific details regarding your individual situation.
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