Replies to This Discussion

Permalink Reply by Jeff Payne on November 18, 2010 at 4:32am

yes it is possible. What state are you in? Ask the negotiator is BofA is going to issue a 1099

Permalink Reply by Charles Witt on November 18, 2010 at 4:51am

I am in Nevada. If we can get a 1099, will he have to pay tax on the amount since it is an investment property?

Permalink Reply by Brian Tripoli on November 18, 2010 at 5:24am

BofA will add "Upon receipt of the agreed amount, BAC Home Loans Servicing, LP, and/or its investors will waive the remaining balance due on the above referenced loan and release the borrower from further obligation therein, and waive all rights to pursue further judgment or deficiency. BAC Home Loans Servicing, LP will report the debt as "settled for less than the amount owed" and issue a 1099 for the remaining balance."

Negotiators will stonewall you telling you it cannot be done and will not send you one unless (A) you negotiate an additional monetary compensation for the release or (B) threaten not to close the just before closing.

The later happened to me yesterday. BofA was the 2nd and had issued an approval w/ the def language and we tried to negotiate the full release by offering 20% of the note vs 10% but got nowhere. The day of closing, we got a hold of the negotiator (after dozens of calls/emails) and said the seller was not closing without the release. An hour later, we got our full release and (surprisingly) w/ just 10% from the 1st. It didn't hurt our case by also stating that the title company was also unwilling to close the transaction with the def language... a bit of a fib but it seemed to help.

Remember, in short sales, nearly everything is negotiable and "investor guidelines" is the great lie used to deflate agents.

Permalink Reply by Wendy Rulnick on November 18, 2010 at 10:18am

Might require a cash contribution from the seller. May be up to 10% of the balance due. Ask the negotiator what it will take.

Permalink Reply by Sonia Carver on November 18, 2010 at 12:07pm

They can pursue deficiencies in recourse states. It's very hard to get them to waive the right in recourse states, but you can try.

You need to contact a tax attorney in your state about the 1099 for. Bank is required to issue a 1099, but it needs to be the right kind. Short sales are not really forgiveness of debt because no profit is realized -- even on investment properties. I've been shocked by the incompetent advice many CPA's are giving out in Arizona.

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on November 22, 2010 at 9:16am

Yes, it can be waived depending on the investor and the borrower's financial situation. If it is dire, on the verge of BK, they may get it waived. Remember, the bank (in this case BofA) has become a "Debt Settlement Company" not the "lender" and the transaction you are in, is primarily to settle debt for the investor at the highest return.