I just received the work out packet on my first short sale from the lender. The bank has language in the packet that will hold the home owner liable for the difference between what is owed on the property and what I may offer on the home. Is this a point of negotiation for the lender? Why would anyone about to lose their home to foreclosure agree to sell the a house to me at a discount and still be liable for the difference?
The banks may do one of two things: issue a 1099 to the homeowner or a deficiency. I hear that most of the banks are sending 1099’s to the homeowner today. The reason behind that may be that the lenders can’t make a deficiency judgement stand up, because they ELECTED to take a discount on their note. That’s the “short” of it! Hope that’s of help to you!
The 1099 relates to the fact that any debt forgiven is taxable income. Many banks have a policy of not pursuing the borrower for the defficiency, so it should clearly be a negotiable point.