Who is Affected? 

• Any property owner who was personally liable on a real estate loan that was foreclosed or partially paid off in a short sale.

What is 1099-C Form?

• This form represents ordinary income (not capital gain) for the “Cancellation of Debt” of the seller/owner.  The amount must be included in income on the seller’s income tax return.

When will the 1099-C be Issued?

• Unless the lender is pursuing a deficiency judgment, the 1099-C must be issued by January 31^st.  If the lender sends the 1099-C, the lender has written off the loss as a bad debt. 

 How is the Amount on the 1099-C Determined?

• For a Short sale: the difference between the full payoff and the short sale payoff  
• For a Foreclosure:  the difference between the full payoff and the fair market value, based on an appraisal at the time of foreclosure.

Does the Seller have any offsets against this income?

• Sale of principle residence (IRS form 982): this is subject to some limitations on amount and the qualifying debt;                                                                                                                 
• Capital loss: seller’s capital loss (for investment property) can be used to offset capital gains and a small portion of ordinary income;
• Insolvency: income can be offset to the extent that debts exceed assets;
• Bankruptcy: depending on when it occurred and whether the debt was included.

Be sure to consult with your tax preparer!

A home is considered “short” if it is valued below what is owed on its mortgage.   If an owner/seller does not have the cash to cover the shortage, a sale of the property can still close providing the mortgage company is willing to negotiate a “Short Sale”.  Short sale scenarios are quite common, but successful negotiations to actually close them are not.

Nationally, 3% of all mortgages are in foreclosure and an additional 8% are 30 days or more in arrears (past due). This means that 1 out of 9 homeowners are late on their mortgage by at least 30 days. Unfortunately, 80% of these homeowners will not take action in order to prevent their home from going into foreclosure and will lose their homes. 

As a Realtor, my primary goal is to help people keep their homes. But, if a sale cannot be avoided, I want to help owners sell their home as quickly and smoothly as possible.

I want sellers to know there are options AVAILABLE NOW to help them avoid foreclosure and spare their credit.

 Everyone is talking about short sales these days.  As a Seller, are you qualified for a short sale on your property? Or, are you a Buyer, wanting to buy a home this way? Depending on your perspective, Seller or Buyer, it is not something for someone who is impatient or for someone who is unrepresented.

What are the parameters and prerequisites for a short sale? If you want/need to short-sell your home, what paperwork does a lender need? Do you know how much time is involved in a short sale? Do you know what a short sale’s consequences are and what you can expect in the long-term if you sell your property this way? What if you buy a short sale; is it different from a traditional sale?

If you would like a confidential discussion regarding the short sale of your Atlanta property, or if you would like to purchase an Atlanta home that is being sold through a short sale, call or email me.  I am a Certified Distressed Property Expert (CDPE) and I can help. Don’t wait to Experience True Experience!