http://www.keytlaw.com/blog/2009/11/confusion-about-short-sales-and-anti-deficiency/
Great source of information for individuals debating whether to short sale or foreclosure. 2 considerations must be observed. One has nothing to do with the other as many people confuse the two.
Anti Deficiency Statue has to do with the lender seeking recourse for their loss after the fact. The anti deficiency law in Arizona affects short sales different than foreclosures (mainly that the anti deficiency law only protects in a foreclosure). Everyone involved in a short sale must make sure language in specific and clear in bank settlement letter to protect your clients from further recourse from bank. I particulary found the statue of limitation information valuable. 90 days for a foreclosure and 6 years for a short sale. In most cases both homeowners and investors are covered under this statue....in most cases emphasized.
The Mortgage Debt Relief Act has to do with Uncle Sam. Whether you short sale or foreclose the bank will issue a 1099 unearned income. Now you have a situation with your taxes to deal with. Whatever amount the banks writes off as a loss is conveniently reported to you as unearned income. This means you have to pay taxes on that income (doesn't this just seem wrong). In any case, Former Pres. Bush enacted the Mortgage Debt Relief Act and Pres. Obama has extended it. It protects owner occupied (not investors or second homes) from having a tax obligation on this unearned income.
The link above is a valuable research tool for those trying to decide between their options. There are many many gray areas that until court cases start setting precendence will possibly be further setbacks for those who foreclose or short sale.
I am not an attorney or capable of giving legal advice. This is information as it has come known to me through my own research.
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