2007-08-12 11:29:58 · 17 answers · asked by rw 1 in Business & Finance ➔ Renting & Real Estate
If the bank forcloses on the house, they sell the house for the amount left to pay on the mortgage (including the tax, so they are still making money) However, they usually also stated that you must start with your loan with them, for a certain about of time. You do owe the difference. However, it is rare to see them sell it for under. A house is always earning equity. Most of the time, when they sell a house, they get much more out of it. Just so you know, if you ever want to own a home again, I would not do this. Try selling it first.
2007-08-12 11:39:01 · answer #1 · answered by Anonymous · 0⤊ 2⤋
It depends on what TYPE of mortgage/loan you have.
If your property is secured by a "mortgage" (see more below), there is a good chance that the process is judicial foreclosure (legal proceeding) and that the loan is "recourse" (the lender can come after you for any shortfall).
If your property is secured by a "deed of trust," then the process is a trustee sale (which does not involve a court proceeding) and the loan is "non-recourse" (the lender cannot hold you liable for any shortfall).
Mortgage vs. Deed of Trust: Though the everyday term for a loan on a house is "mortgage," legally not all loans are truly a "mortgage." Loans (like in California) are secured by a deed of trust. The difference is technical and usually it doesn't matter, but if you cannot make your payment, then it matters a lot!
Also, although the common term for property being taken back is "foreclosure," in areas (like California) where the loan is secured by a deed of trust, the process is technically not called "foreclosure" (even though it may feel the same to the person losing the property!)
You can determine the type of loan you have:
- call your lender's customer service
- read your loan papers
Good luck!
2007-08-20 13:07:33 · answer #2 · answered by Genki 3 · 0⤊ 0⤋
I help people in foreclosure on a daily basis. As a previous person stated, it all depends on the type of foreclosure. For example, in California, we do not have judicial foreclosures and no deficiency judgment can be obtained by the financial institutions since we are a trust deed state. The lender in California can inform the IRS and 1099 you the difference owed. In a judicial foreclosure, they can get a judgment against you.
You might want to look into a short sale.
Regards
2007-08-12 21:18:56 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Yes it could happen. The mortgage company can file a 1099 to the IRS, which means the difference would be considered income by the IRS and you would pay tax on it. Or the mortgage company could put a personal judgment lien against you. It would be best if you know their position if they have to foreclose.
If you need help to avoid that, call 888-995-HELP. It is a counseling service approved by HUD. With the whole mortgage mess they had to do something to help folks.
2007-08-12 18:58:00 · answer #4 · answered by Alterfemego 7 · 1⤊ 0⤋
Yes you will owe the differance on this or file chapter 7
2007-08-20 18:18:42 · answer #5 · answered by Susan W 1 · 0⤊ 0⤋
Absolutely, yes. If you are facing a foreclosure in the future, you need to sell for at least what you owe.
2007-08-18 19:48:00 · answer #6 · answered by Twain Harte Gal 3 · 0⤊ 0⤋
Yes you do. That's why you do anything to avoid it!
You try to sell it. You can sometimes talk the lendor into accepting a short sale. Basically you convince them that market conditions won't let you get the house sold for the balance and ask them to accept what the market value is and let you out. You MUST get the agreement in writing and it MUST state that they are accepting the sale price is payment in full for the debt WITHOUT RECOURSE.
Good Luck.
Don't do foreclosure.
2007-08-12 18:39:54 · answer #7 · answered by Anonymous · 0⤊ 1⤋
It depends upon the loan itself. With a "recourse" mortgage or deed of trust, you have to pay the difference between the foreclosure sale amount and the outstanding loan balance. With a "nonrecourse loan," you do not have to pay the difference. You'll have to read the mortgage and/or note to figure out if it is arecourse or nonrecourse loan. It should be in the "Penalties" or "Default" section
2007-08-12 18:55:22 · answer #8 · answered by mcmufin 6 · 2⤊ 1⤋
Yes, if the property is sold for less than the note amount, the bank can file suit against you for a deficiency judgment. Whether they are awarded it remains to be seen, but it is well within their legal rights. Read your mortgage and note again to see how deficiencies are handled.
Hope this helps...
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http://www.taxsalewealth.com
2007-08-12 19:07:13 · answer #9 · answered by Anonymous · 0⤊ 1⤋
Yes, you do. If there is a deficiency balance you owe this amount plus any legal,collection, and selling expenses.
2007-08-12 20:28:24 · answer #10 · answered by yourmtgbanker 5 · 0⤊ 1⤋