Answer:  - The least expensive thing to do is file bankruptcy. It will cost him $1500 and he can start over from scratch. A lot of lenders, when you tell them you are going to file, will work with you to find a solution. A better option might be to get an attorney or good real estate agent / short sale negotiator to help you push the short sale through with a full satisfaction meaning they can’t ask for any money to be paid back. The loan would be paid in full. Your son would receive a 1099 which would be negated with form 982 as mentioned. Don’t let the bank push you around… unfortunately they deal with homeowners a lot differently than an attorney or 3rd party negotiator because they automatically assume the homeowner doesn’t know what they are doing.

Answer:  - Well, technically they can come after you for whatever is not satisfied. If the short sale is approved and successful, the individual doing the short sale will need to make sure it “satisfies” the loan in which you will receive a 1099-c. If they don’t satisfy the loan, then the bank retains the right to come after you for the deficient amount.

There is actually another option, similar to a short sale, but takes half the time, allows you to stay in the home or (be able to actually sell it in this case) for a profit. We basically get rid of the $150,000 second mortgage by offering a settlement with the lender. The loan is completely satisfied and it never shows up on your credit like a short sale does. Just another option out there for you to think about.

Answer:  - Most of the time banks won’t come after you for just legal fees, if they come after you, they will file a judgment for the amount they lost because it costs them a great deal more to pursue someone for a deficiency. So unless they are confident you can pay, they typically will 1099 the homeowner instead. And if you’re like most homeowners, the debt relief act will counteract the 1099 or you could claim insolvency. Best to talk to you accountant if you have specific questions.

Answer: – We explain what a Deed in Lieu of Foreclosure is in our free reports section. With a deed in lieu foreclosure you are giving the home back to the bank. By giving or deeding it back to the bank, the deed is considered full payment of the mortgage loan, so there cannot be a deficiency judgment. However, there are certain restrictions like all junior lien holders must be satisfied and there must be clear title. Although you’ll be avoiding a deficiency judgment, the bank will 1099 you for the deficient amount. This deficient amount is calculated by taking the difference between the fair market value (FMV) and the outstanding debt. As far as credit issues, a deed in lieu of foreclosure shows up as “Acquisition or Abandonment of Secured Property” and is very similar to an actual foreclosure.

A short sale on the other hand has fewer restrictions but is very similar in avoiding a deficiency judgment. You can ask the bank to satisfy the loan so it’s paid in full. You will be 1099 for the deficient amount. And for your credit, a short sale shows up as a “settled debt” which is very similar, however most credit experts believe a short sale is better on your credit report than a foreclosure or deed in lieu of foreclosure. I would have to agree…but it’s not by much. Any way you go, it’s going to be bad on your credit.

Answer: -Tom, I have to make the assumption that you’re planning on or you’ve already stopped making payments on your home or you wouldn’t be asking these questions.  A short sale in my opinion is by far the best option if you can’t sell your home for what’s owed, rent it out or can’t work out something with the bank like a forbearance or loan modification.  A short sale will affect your credit but will eliminate a foreclosure on it.  If done properly will also eliminate the possibility of a  deficiency judgment.  If a short sale is not accepted an ultimately your home ends up at the foreclosure auction, then you will either receive a 1099 or they will file a deficiency judgment against you.  If they file a deficiency judgment and you can’t pay, they can garnish wages.  Depending on the amount of the judgment, this forces most people to file bankruptcy to eliminate the judgment.

Answer: -  It sounds like you made an offer to the bank for less than what is owed on the property, which is a short sale.  And from what you say, the bank accepted the offer but there may have been some other requirements from the initial seller in order to get everything approved.  As a buyer, it’s not uncommon to wait for MONTHS and if you are patient enough it could even be a year or more before you are able to buy a property in foreclosure.  This is all because of bankruptcies, settling with 2nd and 3rd lien holders, uncooperative sellers, etc.  To answer your question, yes, the bank can foreclose on a property even if there is an offer because they are waiting for certain requirements to be met.  Yes, they can postpone the foreclosure auction as long as the bank sees a legitimate reason to postpone.  Don’t give up.  Keep working close with your agent, I’m sure they are on top of the situation…Just don’t be surprised in you have to wait awhile.  Most home buyers get frustrated waiting and move on to another home.  Good Luck

Answer: -No.  Bankruptcy only postpones an auction or short sale which buys you more time.  In fact, many short sale investors will use bankruptcy as an option if they need to buy more time so it doesn’t go to auction, as long as it’s in the best interest of the homeowner.

Answer: -55% is a lot, but may not prove financial hardship, unless you’ve had a loss in income or increase in bills or something like that.  You can short sell you home to anyone you want as long as they are not related, but you also risk not getting the short sale approved in which then your home will go to auction and then the 2nd may file a judgment against you for the amount they lost.  But if that’s your best option then, yes a short sale is a great route to go.  I would definitely seek help from an agent if you need to find some buyers…or investors in your area would probably love to do a short sale on them.

Answer: -This is a great question…the short sale process involves several steps.  First the homeowner falls behind on payments because of some hardship or challenge and can no longer make payments.  The house is over leveraged, so the loans are more than what the house is worth, so it makes it near impossible to sell.

If you are the homeowner, here is what is now involved in a short sale…

Homeowner – Buyer/Investor/Agent approaches you to buy your home for less than what it’s worth.  You have to concent or authorize buyer to talk to lender about loan(s).  You will fill out some paperwork describing your financial hardship, describing your current financial condition, and most likely you’ll also provice some pay stubb’s if you’re employed, bank statements, W2′s, etc.  You will be asked to cooperate fully with the buyer to get the short sale pushed through.  Once the offer is accepted, you’ll have to sign some more paperwork basically disclosing to you the terms of the short sale agreement and you’ll go to closing and be done.  Then you’ll have to move out of your home if you haven’t already.  Then the bank will either 1099 you for the difference they lost or they can file a deficiency judgment against you.  But a good short sale expert can eliminate the whole deficiency judgment option all together, so really you just have to worry about the 1099.

If you are the buyer or investor, this is what is involved in a short sale…

Buyer/Investor – First you will fax the authorization letter to the bank, the homeowner just signed and wait 24 to 48 hours.  Then you will request a “short sale” or “workout packet” from the bank.  In the packet will be everything the lender requires in order to accept a short sale.  Fill it out completely and make sure you include everything the lender requires.  Once everything is filled out, send it back to the lender and start looking for an end buyer.  If you already have your list of buyers, call them up and let them know about your deal.  You’ll use wet funds to close your deal and sell the property to your end buyer.  You make your money and do it over again.

Answer: -Typically they can’t come after your other assets because the loan was created based on the properties value which was collateral for the loan.  So in the event you didn’t follow through with the terms, they could take the property.  Now with that said, yes they can file a judgment against you which would affect your “assets” because you would have to pay that back or file bankruptcy.  It’s more common that they would 1099 you for the amount they lost but you never know.  They best way to counter a deficiency judgment is to do a short sale and get it accepted as full satisfaction for the loan.  This means they give up their rights to go after the homeowner for a judgment.  All they can do is issue a 1099.  So I would definitely try to do a short sale because it also helps your credit.