Realtor to REI

Foreclosures, Short Sales, Tax Foreclosures
1

I am a bit of a novice in REI but have been a Realtor for years and figure I have an edge and it makes much sense to further this route!

I have been reading this forum and decided it looked like the best place to get some REAL answers. I have absorbed a-lot of material in Real Estate and will have many questions in the near future since I believe a deal has found ME to get into and I do not believe I wish to pass it up.

A bit of background. I am a part time Realtor, assisting my wife in her full time Real Estate career. I have learned that a Double Agent team is much more likely to produce a better income than a single agent and I like working with her on the weekends. I have considered going full time with her but I have a full time career in software that is lucrative enough to keep me in at as well as a long term steady stream income that will become invaluable during REI transactions.

I have some questions that I am sure will be scoffed at by some of the “Old Hats” here but still believe any questions left un-answered in the REI game can haunt later.

My first question is in regards to a SS where the Lender is happy to grant me my offer of $15,000.00 less than what the owner owes to them. My question is what is my liability to the Owner if/when the bank goes after the owner for the difference?? Is there a way to ensure that the Lender won’t go back to the Owner for the difference or is the answer "Well it’s still better to owe the Bank $15,000.00 rather than a Foreclosure?

Thanks in advance!

Bajamas

2

If the lender accepts a short sale payoff they will reconvey their lien and give up their right to pursue a deficiency against the borrower. Thats the good news. The bad news is that it may be a taxable event for the borrower. See this thread: http://www.reiclub.com/forums/index.php?board=30;action=display;threadid=23704

3

I looked at this thread and it seems that there is a possiblity that the HO may end up having to pay income on the deficiency but only if the lender provides the 1099-C according to the FMV, correct so far?

Is it enough for an REI to let the HO know that this is a real possibility and he should consult his tax accountant for further info or should that be up to us to do? Would an unknown like this spoil a good deal if he were to find this out later or does this need to be addressed in the Purchase Agreement Contract in any way??

4

I doubt if the matter of potential tax liabilities should (or even could) be addressed in the Purchase Agreement. But, as a license holder, you probably should give the seller a written disclosure of this potential. This should be done to protect you in case of legal issues later on. As a license holder, you are expected to have more subject matter knowledge and the seller could move against you legally later.

5

Ask if their accountant can prove insolvency, then the 1099 is a waste of paper.