Seller tax liability on assumable mortgage

[Xavier Garcia]

I've heard conflicting stories as to what liability the seller has in a assumable mortgage. I've heard that because the seller is relieving a debt that the IRS would see that as income for the seller. I've heard this about getting large, personal credit debts forgiven as well. Any truth to this? I have a deal that's on the line right now with a couple that is going through a divorce and want me to assume their mortgage so they can wash their hands. The house is in great shape. I'd rather do a 6 month land contract, slap some lipstick on it, sell it, offer them 6k and they can avoid the IRS.

[Steve Vaughan]

Assumable mortgages don't exist anymore. VA allowed them for a while, but not in more than 20 yrs.

So, you'd be buying sub2 the existing mortgage. They will still be liable for the debt, counting on you to make their payments for them.

The tax thing you're referring to I think is when the mortgage co cancels the debt and gives them a 1099C.  That was happening with some debts during the GRC, but much more rare now. Not gonna happen.

Out here in WA, a Land Contract is unheard of. Use a Real Estate Contract for seller-financing if you need to wrap.  Any title co can get you set up. Good luck!