my short sale was just approved..PLEASE HELP!!!

**karlsd** · 11-04-2009, 01:50 PM

My Property info.....paid 215K in 2005...was negative 500/month for 3 years then proceeded with the Short Sale. Its a condo in Florida.

My short sale was approved. I am dealing with 2 banks (primary lien holder is owed 172K, secondary lien holder is owed 32K). I have a buyer for 79.9K. Lien Holder 2 was paid 3K by Lien Holder 1 and is releasing their lien. Lien Holder 2 is going to come after me for the balance of 29K. I was expecting this. We will eventually come to agree at some # and they will get paid and eventually go away.

I am dealing with a "Short Sale Specialist" He is not charging me. He teaches courses on Short Sales and is doing this for free so "he can stay fresh on the ins and outs of the Short Sale Business" His wife is the Realtor. They will get about 6K in commissions.

I was under the impression that the Primary Lien Holder would accept the sale and hit me with a 1099 for the deficiency. My short sale specialist is telling me that this is not the case. Here is what he said:

"It is not a cut and dry process -

The DEFICIENCY BALANCE is collectible. The bank has the right to pursue all legal remedies to collect that debt. Sometimes they collect on it internally...Sometimes they sell it to a 3rd party collection agency...Sometimes they send it to an attorney to collect...Sometimes they sue the debtor for the deficiency. I cannot tell you what they will do with the deficiency balance. If, at any point in time in the future, the bank determines that the debt is not worth collecting, they will then "write it off" and send the 1099 - thus, they are not doing BOTH - they were unable to collect on it so they sent the 1099...If they collect on it, there is nothing to write off - no 1099"

I am very uncomfortable about this. I thought that when I sign on the dotted line that I would know exactly what my future holds. So the bank gets 79.9K, My short sale specialist and his wife get 6K.....I get out of the property BUT now I may still owe Bank one approx 93K and Bank two 29K. I can get screwed.

They have my financials, I am in the red.

My questions are. Is my short sale specialist correct? Should I move forward with this?

Your input is appreciated. I need to make a decision soon!

I should also note that I live in NY. It doesn't matter that the property resides in Florida. NY is a non debt forgiveness state. They can and will come after me.

Thanks

**markbrian** · 11-04-2009, 04:18 PM

Your "short sale specialist" is married to the agent so believe me, he is getting compensated. The fact that he says he is doing this to stay "fresh on the ins and outs" sounds like a line of bull to me. If his wife was not the agent, would he still be willing to do this for free? Probably not.

I would suggest talking with an attorney that specializes in real estate. Speak to an attorney in both Florida and NY, and explain about the relationship between your "specialist" and the agent. Sounds like a conflict of interests to me that might mean some things are being done that are not in your favor.

**karlsd** · 11-04-2009, 10:53 PM

i appreciate the reply. The relationship between my Realtor and short sale specialist does not concern me. And yes I understand that combined they are compensated. I know they aren't doing this out of the goodness of their hearts. But there are people out there that will charge 5K for working the short sale paperwork for you...and on top of that you will also pay the commission. This isnt going to cost me anything. The commission is being paid out of the proceeds of the short sale.

Trust me when I say I was pessimistic from day 1. But I must say they have not steered me wrong thus far. He promised me one thing and that one that was getting me out of this property via short sale without going into a foreclosure.

So now I am at that point. I sign I'm out of it.

I have done my own homework. The property is in Fla but I reside in NY. It doesn't matter where the property is. It matters where i live. NY is a non debt forgiveness state. So they can come after me. Both banks.

I'm not sure what a Lawyer can do. I do have one here in NY i will consult with.

I guess what I am looking for on this board is advice from someone who has recently gone through this.

The way I see it, my back is against the wall. I hold no cards. I agree or get foreclosed on.

The one thing that is getting to me is this.......I though that the Primary Lien holder would tell me now, up front, that they would forgive the debt and issue me a 1099 or tell me they are coming after me. All they have done is accepted the short sale. So I sign and my future will be uncertain. Will they write it off and hit me with a 1099? Will they come after me? can they garnish wages? can they put a lien on on primary? Will they look at my financials, see im in the red, have almost nothing and say this guy has nothing, write it off?

It seems like there is no real process out there. Its a total guessing game. no one can give me a straight answer. Ive spoken to lawyers, Realtors, short sales specialists and the banks themselves....not one straight answer on how this will eventually turn out.

I just think it sucks that bank 1 gets $, bank 2 gets $, my Realtor gets $....and the new buyers get a deal......and I might get my wages garnished.....I just want out.....

**markbrian** · 11-05-2009, 06:40 AM

Sadly there is not a set method since every lender is different. There are laws that might help you, even in NY.

**karlsd** · 11-05-2009, 09:45 AM

understood....consulting my lawyer about this...although I am not sure how much he can help.

Ok I just spoke to the Bank's attorney directly........here is the deal....the closing paperwork my attorney gave me was internal to them....not the ACTUAL closing docs I will be receiving from the Attorney come day of closing later in the month. They said, in those docs, that in fact.....the remaining balance will be washed/forgiven and I would receive a 1099 in the near future to address the balance...which is good and what I initially expected.

I'm not sure why my guy didn't make the same phone call I did.

But anyway....that is good news.

I will still have to fight the IRS over the 1099.....I have been told there is a form I fill out to claim insolvency. Basically prove that I am in the red every month (which i am). They may wash it or knock it down.

I will still also have to fight with lien holder #2. I still owe them 29K. I have been told they will negotiate with me and may go as far down as 3k (10%) to go away. But it may get ugly getting to that point.

I will have to call the bank direct once the short sale is complete and find out exactly how this will all be reported to the credit bureaus.

**markbrian** · 11-05-2009, 10:34 AM

I am glad that things look a little better after speaking with your atty. I wish you the best of luck and if you remain diligent I think you can make this less painful to you and your credit.

**karlsd** · 11-23-2009, 01:56 PM

short sale went through today. So I have 2 fights ahead of me:

1. the 1099 I am expecting to receive from the IRS for the written off balance from bank 1 (172-80 = 92K).

2. The unforgiven deficiency balance on the 2nd. Its now 33K including Lawyer's fees.

From my understanding I have to sit back and wait for the 1099. I should expect to get it 30-60 days after closing. I was told that I can fight this 1099 with IRS Tax form 3648. I haven't looked at the form yet, but I was told its a form that helps you prove your insolvency. In the red every month, which I am. I am not sure how this is going to pan out. I dont know if the IRS will see my #s and forgive it or reduce it or force me to pay it.

As far as bank #2 goes. The process has already started. I was proactive in contacting them first. I gave them my financials, that show I am in the red -1400/month. My plan is to have them come after me; take me to court. Let them spend $ to get $ out of me. I was told they will want to settle. The question is for how much? The reality is i am upside down every month, I do own a primary residence with zero equity, i have no cash in the bank. I do have a job and a 401k but they will have to take me to court to garnish my wages or touch my 401K.

What is everyone's best educated guess on how both of these items will turn out?

thanks

**Michelearray** · 12-02-2009, 01:15 AM

Short sale in real estate is when a lender agrees to discount a loan balance due to financial difficulties of the borrower. Then the borrower sells the mortgaged property less than the outstanding balance of the mortgage loan and the proceeds of the short sale in real estate are turned over to the lender as payment of the debt. In short sale in real estate the lender has the right to approve or disapprove the intended sale.