house foreclosures in florida
Foreclosures and 1099s?
here’s our situation: I have a home in NC, my wife has a home in fl. We got married this past year. We decided to sell the house in florida and move to the house in NC. the problem is: we owe 217,000 on the house in florida and the fmv is about 175,000. The value of the house dropped about 40,000 in less than a year! We have two mortgages on that home, the first loan is for 175,000 and then a 2nd loan for the remaining cost of the house, about 40,000. What are our options? Can the bank sell the house at any price they want and than we’re stuck with paying taxes on the difference, and than also have to payoff the 2nd mortgage of 40,000?
A lot will depend upon the wording of the mortgage loan contracts. Many mortgages are “non-recourse” which means that the property is the only security for the loan. If it’s foreclosed upon or you do a short sale the lender cannot recover any shortfall from the borrower.
The other issue is that any debt forgiven may be considered taxable income to you. This is called Cancellation of Debt income or COD for short. This can get sticky for you. You may be able to avoid the tax if you are insolvent at the time of the cancellation of the debt. You are insolvent if your total liabilities exceed the FMV of your total assets on the date of the COD. Contact a tax adviser for further information on that issue.
