I remember reading during the the spring that between 07-09 the homewoners would NOT have to pay for ANY defiencies during this time if they got approved for short sales.

Would my clients have to pay for a defiency if we closed “next year”???

Does anyone know ???


Do you mean deficency or taxable income? You statement is very unclear.

Are you reffering to the debt relief act? The debt relief act is available to homeowners who are short selling their primary residence and help them to avoid paying taxes on the SPO remaining difference that is considered income that they will receive 10-99.

You clients should speak to an accountant.

I’m almost positive that I read this on the internet. If a homeowner does a short sale on their primary residence they will NOT have to pay any defiencies. The banks cannot go after a defiency judgment towards the homeowners provided it’s done between 2007-2009 (window).

I’m trying to figure out if I don’t close until the next year if my clients will be obligated to pay a defiency on their property??? Or… since I started working on their short sale in september of this year that they won’t??? I hope I’m making sense sorry in advance for not being able to be a wiz with words :confused:

I suspect that torojd is talking about the unpaid balance. The part the bank isn’t getting because they are letting the property go for less than the mortgage amount.

Can’t help on the timeline. As far as I know, it is up to the individual bank weither or not they go after the original mortgage holder for the balance or not.

I’m referring to the defiency (difference from what they are owed to what they accept the “shorted” payoff). Banks can’t go after the homeowner for the defiency provided it’s between 07-09. Apparently there was a three year window that banks can’t go after the homeowners for a defiency.

I’m trying to figure out if my client will have to pay for any defiencies if we close next year in 2010?

Like Lyonel said, talk to accountant(CPA). Chances are they will have to be insolvent to avoid paying taxes on the income. Sorry I don’t know about the timeline either. Herbster

Well the answer is pretty simple

Ask the lender if they will be going after a defiency judgement… They will always let you know…

I disagree with summits answer. If on the approval letter is states that the short has been approved and settled in full for less than the full amount, then they cannot pursue the seller. If it does not read that then it will usually state that the bank and or investor reserve the right to pursue for the deficiency. Typically these account are sent to recovery departments, and the people you are dealing with for the short sale are not the ones that will be pursuing the homeowner. If you ask them if the homeowner will be pursued you will typically get a neutral answer; something along the lines of that they have no idea or that there is a good chance that they wont be pursued or vice versa.

The only way a homeowner can insure that they will not be pursued is to have been approved and “settled in full for less than the full amount”. Also, if you do not receive that on the approval: Ask the bank if they will pursue and ask that agent get you something in writing and you will see that they will not issue anything in writing because they do not make decisions on who gets pursued and who does not.

Good Luck

Or you can ask about the defiency amount prior to there being any suprises in the letter! Which would make more sense to me. If you are going to hire someone to negotiate Short Sales on your behalf make sure they handle the defiency amount as well. If they don’t do that for you there could be suprises around tax time!

I would talk to an accountant personally. But to answer the question the 2007 to 2009 bracket only applies to the taxes from the deficiency, not the deficiency itself from my understanding. Just ask the bank to waive the defieciency judgement in your cover letter and if they agree to that they will say so on their approval letter. What tatertot said about it being up to the bank is correct, it’s the banks right to go after the defiency but they usually wont. Just to be safe I like to get it in writing :slight_smile: