Posted on: 21st Jul, 2011 10:06 am
We are being offered a short sale rather than foreclose thru BofA, they say that whatever the house sells for, the remaining balance will be forgiven...what about the taxes owed for the remainder balance, will I still be liable for it?? So is it better to just simply let the house go without having to be liable for the taxes...We filed chap 7 and had reaffirmed our mortgage....please advise...thanks!
A short sale is better for you than the foreclosure. Mentioning taxes you are referring to the property taxes and not the IRS tax that could affect you regarding the deficiency amount, correct? Once the home has transferred out of your name and into the new buyers name, the taxes will get paid by the short sale bank. The IRS on the other hand treats a foreclosure, deed in lieu and a short sale as income. If you owe 500k on a home and its sold via foreclosure or shortsale at 250k, then the IRS would treat the other 250k as income, not a loss. Most people can take the IRS exemption to cover the loss, but speak to a tax professional to see if this would apply to you. Good luck