Do I Owe Money After I Have Been Foreclosed On?

I have got been doing short sales for just over 5 old age as of this article, the two most resonant questions, based on the course of study of action as it associates to the foreclosure are as follows:

1. Volition Iodine owe the bank money after they foreclose on my on home?
2. If you are able to negociate a terms and purchase it for less then I owe, will the bank come up after me for the difference?

As a homeowner, that would be a very of import inquiry for me as well. Often, when I ran into with homeowners, I always explicate how the foreclosure procedure works. If you are not aware of the legal procedure in your market, you should learn. It is of import that you are able to reply this inquiry for the proprietor when it arises.

When the lender or bank forecloses on the property and they eventually sell the property for less than what was owed, then a lack bes with the loan. The lack is the difference between what the homeowner owed and the amount the property sold for.

For example, Virgin Mary owes $100,000 on her home and the lender forecloses and sells the property for $60,000 at auction. There is a lack of $40,000 for which the lender can then litigate the homeowner. The cardinal phrase is “can sue.” That is the right of the lender. However, that is a pattern that almost never haps but, it is a existent concern for the homeowner. In most cases, the homeowner desires nil else to make with the lender once the property is sold at auction.

If the lack judgement is granted, it would look on the homeowners’ credit report just as any other judgement would appear.

While the second question, on its surface looks to be similar to the first, it really isn’t. That’s because the result is different. The homeowner, while they may not be savvy to the short sale process, will desire to cognize what haps to the difference. That is what you hold to purchase the property for and the current loan balance on the property. Volition they be required to pay the difference? During the short sale process, you can negociate with the lender to not seek a lack judgement against the homeowner.

Some lenders as a matter of policy, will not seek a judgement against the homeowner because they experience they have got waived their right by accepting a short sale however, if you can get them to openly acknowledge they will not seek a judgment; the proprietor will be more than than happy.

There is a second publish as it associates to the lack and that is the 1099.

The lender will issue a 1099 to the homeowner for the difference. In Mary’s case, the lender will publish her somes 1099 for $40,000. This volition have got got to be reported as income Virgin Mary had received and thus she will have to pay taxes on the $40,000 as though it was earned income.

Either way, the lack judgement can be of great concern to the homeowner. It’s existent if the property sells on the courthouse steps. In my dealing with lenders, we have got establish that they generally will not seek a lack judgement because of the hardship.

There are a couple of options that the homeowner have as it associates to the lack judgment. In Mary’s case, she could register bankruptcy to turn to the judgment. Virgin Mary could also short sale the lack with the lender at a future date. In other words, offer the lender a lesser amount as “payment inch full.”

Here is an of import note. The lender, if they issue a 1099 cannot then litigate for a lack judgment. The lender can only prosecute one or the other. In other words, Virgin Mary can’t have both a lack judgement and 1099 from the lender.

Lastly, as you let on to the homeowner this of import information, you must inform the homeowner about the branchings of the lack and the 1099. It is the homeowner’s determination to go on working with you or not.

It is obviously in the best interest of the homeowner to be proactive and deal with the foreclosure. At least there is A opportunity that the investor can negociate away the lack before it even goes an issue.

About the author…
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