What is the effects of letting an investment property go into foreclosure?
Jul 19, 2009 in
Financial and Loan Tips
ceeze07
I have been trying to find out what happens when letting an investment property go. Is it the same as a normal foreclosure or short sale, where you get taxed on the difference? Or is there some other route this takes. Just a question not my situation!
I have been trying to find out what happens when letting an investment property go. Is it the same as a normal foreclosure or short sale, where you get taxed on the difference? Or is there some other route this takes. Just a question not my situation!
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3 comments
infinite crisis 247 on July 20, 2009 at 1:18 pm
it is similar, except for the biggie. when the bank sells the property as at a shortage, you will get hit with a 1099 for the shortfall. this will be considered income to you. as the property was a non owner occupied investment property, you will not be protected from the 1099.
suz on July 23, 2009 at 7:24 pm
I do not think you will be taxed for the diference. When a forclosure property is sold a your local courthouse. It is sold by the lender with a substitute trustees deed. That means that it is not you that is selling it it is the lender. The lender would be responsible for any tax liabilities as far as a shortage or overage on the sell of the property. The onlly thing you will suffer is a big blemish on your credit.
I Buy And Sell Houses on July 26, 2009 at 6:22 am
Infinite’s answer is correct. You’ll get hit with a 1099.
However, you also asked about a short sale. In some cases–it depends on the lender–the lender is requiring that the owner of an investment property put up some of his own money to facilitate the short sale. Sometimes this is done with cash, sometimes with a note. For example, if someone owes $500,000 on a property, attempts a short sale at $400,000, sometimes the lender will approve it only if the borrower puts up $10,000 (for instance) of his own money.