Current usage or "short sale" in the real estate world is when the mortgagee agrees to release its claim for less than full payment. I'm not in the lending business, but I assume the lender weighs the cost/benefit of taking what it can get in today's market vs foreclosing.
All lienholders have to agree, but since everyone but the first mortgage would be wiped out in a foreclosure, lesser claims really don't have much reason not to agree, assuming the property is going for FMV.
"Stuart Bronstein" wrote
"Short sale". A nice term for not wanting to be held responsible for the results of your bad decision.
But as you seem to be describing it, the lender has to agree to the sale, and therefore some resolution of the remaining debt. In that case the actual sale is meaningless for tax purposes and you only have to focus on the discharge of debt issue.
A foreclosure is not even the same thing as selling your house for less than the mortgage balance in an arms-length transaction.
Don't forget that for every greedy borrower there was a greedy lender. In such cases I have sympathy for neither. When we're dealing with ignorant borrowers who bought more house than they could afford I still have limited sympathy. After all, the end result is that they spent some time living in a house that was above their means. The lenders should have known better.
True, but except in those cases where the sale is being driven by non-financial circumstances, it's usually the prospect of foreclosure that's driving the process.
That's certainly true. But if a lender that forecloses can only collect what they can sell the house for after the foreclosure (in an arms-length transaction), it's faster, easier and cheapter for them to go along with a short sale that would get them about the same amount of money.
Stu
But they have no reason to agree, either.
Suppose I have a secondary lien. If I agree, I get nothing, period. If I don't agree, they go to a lot of extra effort, and I probably get nothing anyway but a miracle might happen. Besides, the nuisance value of my claim ought to be worth something.
(If they're smart, they time it so that I get the tax writeoff a year earlier by agreeing.)
Seth
Is it possible that the lender will NOT 1099C me?
thnaks
If you have a nonrecourse loan (purchase money loan) there should not be a 1099-C. If you refinanced your purchase loan, the refinanced loan is no longer a money purchase loan and is therefore no longer a nonrecourse loan. You would get a 1099-C.
Do businesses have until the middle of February this year to send out their forms?
No. You may be thinking of the delay to 2/17 for 1099-Bs or consolidated statements from investment companies.
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