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Foreclosure on primary that turned rental due to move

Posted on: 02nd Jan, 2012 11:17 am
Hi There,

I bought a condo in dec 2006 that was my primary residence till 2009. I moved to another state for a job with the kids and bought a house in april 2009 in that new state. Decide to rent out the old condo using a rental company in the mean time that it was put on the market. ( a loss of $350 /month rental didn't cover the mortgage and HOA. The condo was on the market for 2.5 years ( dropping the price each month till it was at a short sale value). I stop payment on january 2011 and it was foreclosure on sept 2011. It was still rented out till now ( Which I will have to pay taxes for 2011). My question is: My FMV ( 125k ) is higher than the amount I owed ( 116k) and will i have to pay taxes on it or will be forgiven by the Forgiven tax relief or it is up to the bank to decide?

Thanks in Advance for your responses. Trying tgo figure out my 2011 taxes
Hi Esrtie!

Welcome to forums!

After a short sale, you will be liable for paying off the deficient balance resulting from the sale of the property, if any. The lender will not forgive the dues. So, the question of paying taxes won't arise. If the property is sold off for a profit, then you will receive the extra amount from the lender after he deducts his dues from the sale price.

Feel free to ask if you've further queries.

Sussane
Posted on: 02nd Jan, 2012 08:42 pm
Hi Sussane, Thanks for your reply.

The short sale was almost an option at the end but it is has been foreclosed since then. it is a REO as of sept 2011 with a FMV of 125K and what I owe is 116K on the property ( will I pay any taxes?. If i understand you correctly the REO ( which the banks owns now will become a short sale when they try to sell it? I thought that once the condo foreclosed upon, it cannot become a short sale?
Posted on: 03rd Jan, 2012 11:35 am
Hi Estrie,

Once the property is foreclosed by the lender, it won't be considered as a short sale any more. It will be considered as a foreclosed property. If you owe a deficient balance on that property after the sale which the lender forgives, then you may have to pay taxes on that forgiven debt.
Posted on: 03rd Jan, 2012 08:33 pm
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