The Tax Questions Blog

Posts Tagged ‘who gets 1099’

Question: Shortsale-1099 form end of year? who gets taxed?

if i consider doing a short sale on my home. who is paying taxes end of yr? is it me? We owe 400K less than what buyer is offering, who will get taxed? is it true that we will have to pay? please let me know. is forclosing better! whats the benefit of short sale!

note: were still not late on our mortgage, but, there is no way to pay it anymore, its 7k a month, and NO way to refi, and NO way to SELL!

Answer: I'm a bit confused.....if you owe 400K less than what your buyer is willing to pay, while are you contemplating a short sale? Get it closed and funded and walk away with your cash!

If you meant to say that the buyer is offering 400K less than what you owe, I'd say you will definitely need to contact the lender and advise them of your situation. The lender normally will not consider short sale request until after payment is in default for 1-3 months, but contact your lender's "Loss Mitigation" department or "Homeowner Retention" department and start the dialogue. In my state, the lender will almost always order an appraisal of the home too, just to make sure they're getting as much for it as possible.

Regardless, the loss the lender suffers may in fact be considered your gain, even though you essentially walk away with no cash in hand. And while you could theoretically receive a 1099 from the lender, in the last 9 years that I've been doing short sales, not one of my client has ever received one. So, possible yes, likely no.

If you are referring to property taxes...they will be prorated at the closing table with you giving the buyer credit for the portion of the year in which you had ownership (including the day of closing), unless of course you home doesn't close/fund this year in which case you (if you don't escrow taxes in our payment) or your lender (if you do escrow taxes) will make the payment. Of course, if you don't have the funds to pay the ad valorem taxes, the lender will eventually have to pay those too.

Just remember to contact your lender ASAP and be honest with yourself and the lender. They are dealing with these requests by the hundreds so you'll have to be patient

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