Posted on: 08th Oct, 2010 07:27 pm
We have 1st and 2nd mortgage with two different lenders. If we sell the house for less than is currently owed and get a loan to pay balance is it considered a short sale. How will this impact our taxes and credit. We really can't afford it all but haven't been late with any payments. We had our house up for sale for 8 months with no offers and don't know what else to do. We have tried renting and haven't gotten anyone to rent. Any suggestions.
Hi wild2haz,
If you sell off the property less than what you owe on your mortgage, then it'll be known as a short sale. You'll be liable for paying the balance amount resulting from the sale of the property. If you pay off the dues, then you won't be liable for any taxes. Your credit score will get lowered by 85-100 points. However, if the lender forgives the dues, then the forgiven amount will be considered as your income. The IRS can charge taxes on the forgiven debt. However, depending upon the Mortgage Debt Forgiveness Act, you won't be liable for paying taxes.
If you sell off the property less than what you owe on your mortgage, then it'll be known as a short sale. You'll be liable for paying the balance amount resulting from the sale of the property. If you pay off the dues, then you won't be liable for any taxes. Your credit score will get lowered by 85-100 points. However, if the lender forgives the dues, then the forgiven amount will be considered as your income. The IRS can charge taxes on the forgiven debt. However, depending upon the Mortgage Debt Forgiveness Act, you won't be liable for paying taxes.