Home Firm Overview Attorney Profile FAQs Bankruptcy Contact Us
San Fernando Valley Personal Injury Attorney
Which chapter of bankruptcy is right for your situation?
Understand how to stop the foreclosure process.
Are you struggling to pay your mortgage?
Click to call


Areas of Practice
Benefits of Bankruptcy
Chapter 7
Chapter 13
Foreclosure Defense
Life After Bankruptcy
Loan Modification
Loss Mitigation
Contact Us
Tell Us About Your Case:
Click here to read our firms blog.1299 Corporate Drive 
Westbury, NY 11590

The Dupe and the Short Sale.

If you are a homeowner and have been approached by a lender offering you a "short sale", (a sale of real property in which the sales price is less than the amount owed to the lender on the mortgage) be warned that you are about to become a dupe in a game where the bank holds all the cards. How does the game work?

First you need to find someone to buy your house and only then do you ask the bank for its approval before you can sell. The catch is that the bank usually does not approve the amount offered by the prospective buyer.

Short sales can take several years to complete and in many cases there is no sale at all. Homeowners cannot wait so long in such an intolerable financial situation. While the homeowner is attempting to sell the house, the bank will still require monthly payments in a timely manner. The Bank is likely to reject any short sale offer because most of them are not acceptable to the Bank who is receiving your monthly payments. The Bank is getting fatter on your money while you see no end to your suffering.

During the time you are waiting for the short sale to happen you will become fair game for predatory and unscrupulous tricksters who will offer you various programs to get you out of this mess but who are only seeking to victimize you and make a fast buck for themselves. Finally, you may end up in foreclosure after making all these hard earned monthly payments to the bank

The Banks are holding all the cards and have the deck stacked against you. They can sell the mortgage to investors, rent out the property, or sue you for the deficiency on the mortgage (the difference between the banks sale price of your property and the amount you owe on the mortgage including late fees, penalties, attorney's fees and other charges related to the foreclosure). This deficiency can sometimes run in the hundreds of thousands of dollars.

Following the foreclosure, you may hear from the I.R.S. who is very interested in the short sale transaction because you may be taxed on the deficiency depending on the law existing at the time of the sale. The Bank will issue a 1099 Cancellation of Debt form reporting how much income you realized from the sale. The Bank receives a tax deduction from the write-off of the mortgage - the loss - but you instead receive an income tax on the amount of the deficiency which could be thousands of dollars catapulting you into financial ruin.

How could all this be possible? Why this result? Take a look at my future post on the difference between recourse versus non-recourse mortgages.

Categories: Bankruptcy