My House is in Foreclosure & Listed for Short Sale, but the Offer is Less Than I Owe

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My house is in foreclosure. I've listed it for short sale but the offer I've got is for less than I owe. I'm Steve Kramer. I'm a Florida foreclosure attorney and the question is, “What do you do in a situation where you're doing a short sale and you've got an offer and you're ready to go ahead and maybe accept that offer and close on the deal?” Well the question is when you sell a short sale - when you sell a property at short sale - you're selling it for less than you owe. And the key thing here is you don't want to wind up owing money to the bank, so you've got to make sure that the bank releases you from a deficiency. And if the bank doesn't release you from deficiency in a short sale, you shouldn't do it. That property you've got is your leverage. That property may be worth $100, $200, $300,000 dollars - whatever it's worth. And it may not be as much as you owe but it's still got value and that's leverage. That's a negotiating tool. And if you give that to the bank, you've just lost your ability to negotiate. So you want to make sure that you work out your deal while you still got the leverage, you've got to do that. Now the other thing you want to look out for here is tax liablity. It's going to be very important to meet with a CPA and your attorney to talk about the possible tax ramifications if you do the short sale. Because what the bank can do is they can issue you a 1099c for cancellation of debt or debt forgiveness, right? Because essentially they might be wiping away $60 or $80,000 dollars of a debt and you can get a 1099 for that $60 or $80,000 dollars and have to pay tax on it. So you definitely are going to want to sit down with your CPA and make sure that you plan for this. This is something that peope don't think about and a lot of attorneys don't bring up but you've got to have a CPA involved in the process becuase you don't want to be on the hook for money that you hadn't considered. It's definitely got to be a factor. And you can negotiate with the bank on these issues, right? I mean maybe this is a legtimately disputed debt. And if it's a legimately disputed debt then it's not bank forgiveness. So this is something that you have to talk about. So if you want to talk about short sales, I'm glad to do that. I'm telling you this because I've dealt with many, many short sales and I've seen them come back. I've seen litigation over short sales. I've seen the bank come after people who tried to do a short sale, who finished a short sale but the bank didn't release them from deficiency. I've seen it happen. I've seen how it goes bad and I can help you make sure that it doesn't go bad. I can make sure that it's done right. So pick up the phone, give me a call. I'm Steve Kramer, thanks for watching.

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