What Should Happen During My Short Sale? Part II
If a Short Sale transaction is properly negotiated, the formal approval shall contain provisions that upon receipt of the proceeds from the closing of the short sale transaction, the Mortgage shall be satisfied and the Promissory Note cancelled/satisfied. If the Promissory Note or remaining indebtedness is addressed in the approval letter as being canceled or satisfied, the Short Sale Lender should issue a 1099C in the amount of the remaining outstanding indebtedness. If the remaining outstanding indebtedness is cancelled, there is no further obligation upon which a deficiency money judgment can be pursued.
Whether the subject property is a primary residence or investment property, full and final settlements are possible. The decision to participate in a loss mitigation option should not result in later finding out there is still responsibility for the monetary obligation in the amount of the remaining outstanding indebtedness under the Promissory Note.
Although receipt of a full and final settlement of the loans may be obtained, it is important to understand that issuance by the Short Sale Lenders of 1099C’s can result in potential tax ramifications. A licensed tax professional should be consulted to determine what the tax ramifications may be, if any.
The “Best Result” of a Short Sale loss mitigation option is to obtain approval letters stating that upon receipt of the proceeds from the Short Sale closing, the Short Sale Lender(s) will: issue a Satisfaction of the Mortgage; cancel or satisfy the remaining outstanding indebtedness from the Promissory Note; report the transaction to the credit bureaus as satisfied (credit scores will be reduced in accordance with each individual’s credit portfolio); and issue a 1099C.
If you find yourself in the middle of a Short Sale Loss Mitigation option and are concerned that you may not be on the path to obtain the “Best Result”, whether the subject property is a primary residence or an investment property, please call the Dellutri Law Group and speak with an individual who will be able to analyze your specific situation and determine if your transaction is on the right path and help you achieve the “Best Result” available for you.
This Blog was written by Annette Giardina Haber, Esquire, of the Dellutri Law Group, P.A. Ms. Haber runs the Firm’s Real Estate Department and concentrates her practice as a real estate transactional attorney. She represents clients through loss mitigation options, drafts contracts, issues title insurance and handles residential and commercial closings.
