Posted on: 05th Feb, 2009 07:32 pm
HEEELP!
Hello all,
I own a home in CA, and things did not work out between my wife and I. We tryed to sell our condo and break even. However, we are about 20k over what others are going for in the same complex. We both want out of the condo and do not want to deal with renting it out. We are current on all payments, taxes and all. My question is should we talk to our lender about short selling???? Should we just go ahead and short sale? or should we just bring this up to the lender and see what they say since this is because of a divorce not because we couldnt make the payments. By the way my credit is awesome and do not want to see it dip down but I do not see any way around it.
Thanks in advance
Confused
Hello all,
I own a home in CA, and things did not work out between my wife and I. We tryed to sell our condo and break even. However, we are about 20k over what others are going for in the same complex. We both want out of the condo and do not want to deal with renting it out. We are current on all payments, taxes and all. My question is should we talk to our lender about short selling???? Should we just go ahead and short sale? or should we just bring this up to the lender and see what they say since this is because of a divorce not because we couldnt make the payments. By the way my credit is awesome and do not want to see it dip down but I do not see any way around it.
Thanks in advance
Confused
Hi
A short sale is not a bad option considering the fact that it causes your credit scores to drop down by a considerably lower margin than in case of a foreclosure. A foreclosure can make your scores dip down to a whooping 250 points (approx) whereas a pre-foreclosure or short sale would cost you around 70-100 points on the FICO scores. As you mentioned you have an awesome credit score, I do not think hurting that, even by a small margin, would be very good option for you. You can also think of getting your wife to quitclaim her share in property to you. Thus you can become the sole owner of the condo and make your timely loan payments (since you say you are current on all payments), pay off the debt and the icing on the cake, in this case, would be that it, in no way, hurt your credit score.
A short sale is not a bad option considering the fact that it causes your credit scores to drop down by a considerably lower margin than in case of a foreclosure. A foreclosure can make your scores dip down to a whooping 250 points (approx) whereas a pre-foreclosure or short sale would cost you around 70-100 points on the FICO scores. As you mentioned you have an awesome credit score, I do not think hurting that, even by a small margin, would be very good option for you. You can also think of getting your wife to quitclaim her share in property to you. Thus you can become the sole owner of the condo and make your timely loan payments (since you say you are current on all payments), pay off the debt and the icing on the cake, in this case, would be that it, in no way, hurt your credit score.
Thanks for the info, I dont think that I could sustain the property by my self though. Also, I am thinking in advance to next year and wondering if I would have to pay extra taxes on the 20k that the bank would have to forgive. I think I heard people say that it would be considered a gift, therfore earned income or something like that. Sorry If I sound way off but I am a new to the new homeowner thing. If I decide to short slae should I go through my realtor or the bank?
Hi
The outstanding balance on the loan forgiven by the lender will be subject to income tax. Thus you will have to pay taxes on the 20k. Debt forgiven is reported to the borrower through 1099-c form, cancellation of debt. the same is also reported to the internal revenue service who compares it with the income tax return you file for that year.
However, the new mortgage forgiveness debt relief act,2007 which allows tax exemption under certain situations such as bankruptcy or insolvency. It can also be exempted if it is an acquisition debt the proceeds of which are used to buy, build or reconstruct home. the home has to be a principal one used for residential purposes. So, vacation homes, second homes etc do not qualify for tax exemption.
Thus, I would recommend a consultation with a tax advisor who can guide you as to how to qualify for such an exemption.
The outstanding balance on the loan forgiven by the lender will be subject to income tax. Thus you will have to pay taxes on the 20k. Debt forgiven is reported to the borrower through 1099-c form, cancellation of debt. the same is also reported to the internal revenue service who compares it with the income tax return you file for that year.
However, the new mortgage forgiveness debt relief act,2007 which allows tax exemption under certain situations such as bankruptcy or insolvency. It can also be exempted if it is an acquisition debt the proceeds of which are used to buy, build or reconstruct home. the home has to be a principal one used for residential purposes. So, vacation homes, second homes etc do not qualify for tax exemption.
Thus, I would recommend a consultation with a tax advisor who can guide you as to how to qualify for such an exemption.
Yes please talk to the bank and see about a short sale cause foreclosure will ruin your credit for 7 years and will make it really hard to get a new loan.