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mikefink_1 · Joined: 09 Oct 2008 Posts: 1 1.37 Dollars($)

I bought a house in May of 07 for $529K. The house is worth probably $375K now or less. I can't afford the payments and want to foreclose, do a deed in lieu or if they will let me, a short sale. Will I have to pay any taxes to the IRS and California? I think California is a non-deficiency judgement state. My loan is purchase money loan 80/20 (2 loans) strictly for the purchase of the house. We own a 2nd house in Illinois but I haven't lived in it for over 4 years. Do I have to live in my current primary residence for 2 years to avoid taxes? Thanks

smithsussane · Posted: Thu Oct 09, 2008 8:47 pm Post subject:

Hi mikefink!

Welcome to Forums!

If the lenders allow a deed in lieu foreclosure or a short sale, then, I would say they are better options than foreclosure. As you have mentioned that you stay in California, I do not think that the deficient amount will be forgiven and you will have to pay that to the lender. So I feel, you will not have to pay the taxes. Yes, in order to avoid taxes, you will have to live in your current primary residence for 2 years.

Feel free to ask if you have further queries.

Sussane

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On a short sale do you have to pay the lender back for the difference owed? Can they make you pay it? What does the California law say?

jerry · Posted: Tue Dec 16, 2008 3:19 am Post subject:

Hi Becky,

Normally in case of a short sale, one has to pay the deficient amount to the lender. But as California is an anti deficiency state, the borrower may not have to pay the deficient amount.

Thanks,

Jerry

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Do I have to pay taxes on my house that I lived in for 1.5 years in california.