If you have recently missed mortgage payments on your house then you are risking possible foreclosure. This can be a really stressful time for anyone as it just hits you from all angles: your lose your beloved home, your credit rating dips, and you end up footing the bill as well. To save your home or property as well as your credit rating you may want to consider doing a short sale, which is a step to avoid foreclosure in Fairfax so you can have a chance to protect your credit rating and keep your home.
Basically what happens in a short sale as the name implies is you sell your property at a huge discount wherein a lender may agree to execute a short sale while the homeowner is still making mortgage payments to avoid foreclosing on the home. Even with the foreclosure company acquiring the home for a fraction of the original mortgage amount, say they buy a home worth $100,000 for just $80,000, you still continue to owe the original amount. This yields to a 20% discount for the buyer. However, you will still need to deal with that remaining debt.
Your mortgage company has two options for dealing with the rest of the mortgage debt. At any rate, these options are both under the assumption that you’re still accountable for whatever amount is still owed on your mortgage. For the remaining debt, the mortgage company has two options to get this from you, either through a foreclosure deficiency judgment or via a 1099 form. The deficiency judgment will mean you still owe the remaining difference of $20,000 to the mortgage company.
After being able to avoid foreclosure in Fairfax via short sale, a deficiency judgment is then passed by the mortgage company against you so they can claim the balance owed. Just like in any other lawsuit, if a deficiency judgment is filed against you, you will have no choice but to make the necessary payments to the mortgage company for the amount owed. To make lives easier for both parties, most mortgage companies would not resort to a deficiency judgment if you can prove financial hardship. As a workaround, what they will do is consider the $20,000 a business loss and consequently send a 1099 form instead of a deficiency judgment.
Once you do get the 1099 form, keep in mind that the shortfall or the $20,000 deficiency has to be listed as income for tax purposes, with 10-15% of it to be owed to the IRS. To ensure correct filing and declaring of taxes, the amount listed in the 1099 must also be declared as income in your tax return submitted by the end of the year. Although the income listed on the 1099 won’t affect your taxes that much, it will still be taxed just like any other forms of income. In essence, only 10% of the income listed in the 1099 will be owed as taxes.
No matter how you choose to avoid foreclosure in Fairfax, the reality is, you will end up in a considerable amount of debt. Since lenders have two ways of dealing with mortgage debt, it can also be owed differently in two ways, either with the IRS or with the mortgage company. The good news is no matter which way you look at it, this amount owed is way lower than the impact of a foreclosure on your property.
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