Los Angeles, CA · Member since 2009 · 717 posts · 50 votes
Hello, I have a guy who is willing to sell the house for whatever the bank is willing to take. He just doesn't want the bank to foreclosure. Fortunately, the bank is local and the bank is willing to accept a low offer. How would you structure the deal so the owner cannot back out? Also, he is worried about a 1099 since he is selling the house for less than what it's worth he is afraid he'll be taxed on the different from the amount we pay the bank and what he owes. I've never heard of this, but is there anything we can do? Thanks in advance!!
The mortgage debt relief act of 2007 may forgive him of the cancelled debt, depending on whether this was his primary residence and a few other factors. You may want to ask for legal counsel on this matter.
Ask the bank what they will take, fill out a sale contract with that amount and enough to pay seller's costs in closing and have the seller sign it.
Small town banks might do that, a formal short sale probably won't happen on the cuff.
If you're willing to pay what is owed you can make out the sale contract for amounts sufficient to payoff existing liens. Guess this is a cash deal.
You could also use an option and simply write it in that the price is to be sufficient to pay off the existing loan and seller's costs at settlement, such being at your option. That ties it up and if anything else is found you can walk. Good luck.
The mortgage debt relief act of 2007 may forgive him of the cancelled debt, depending on whether this was his primary residence and a few other factors. You may want to ask for legal counsel on this matter.
Does he need to fill out a 1099 and file it as income? He was worried about this and I heard of this too somewhere. Thanks !!
The 1099 would be filled out by the party who is "paying" this seller; the "paying" in this case is a forgiveness of debt. So the bank/lender/servicer will be the one issuing the 1099, the seller will receive the 1099 and will include that in the tax return for the year in which the 1099 applies.
He is right to be concerned about this, and as mentioned by others already counsel from professionals should be consulted (and not just the seller IMO).