Southwest Florida Title Insurance & Real Estate Blog

This is the 8th tip of “10 Questions You Should Ask About Florida Short Sales” eBook, which is available as a FREE download.

If a Florida short sale lender cancels debt, there may indeed be tax consequences. The Internal Revenue Service treats cancelled debt as income. The 1099-C Form from the IRS gives a nutshell version of what cancelled debt means to a debtor and taxpayer in its “Instructions for Debtor”:

“If a Federal Government agency, certain agencies connected with the Federal Government, financial institution, credit union, or an organization having a significant trade or business of lending money (such as a finance or credit card company) cancels or forgives a debt you owe of more than $600 or more, this form [i.e., the 1099-C] must be provided to you. Generally, if you are an individual, you must include all canceled amounts, even if less than $600, on the “Other income” line of Form 1040 . . . .”

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This is the 6th tip of “10 Questions You Should Ask About Florida Short Sales” eBook, which is available as a FREE download.

Lenders occasionally require a new obligation in exchange for approving a Florida short sale. This new obligation is typically in the form of a promissory note.

Most promissory notes required after short sales are unsecured debt obligations – not unlike the note you signed for your original home loan but without the mortgage to secure the debt.

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It is not uncommon for homeowners and real estate professionals to consider a short sale impossible if there is more than one mortgage involved or junior liens (i.e., liens or judgments that affect the title to the property). This is not surprising for a number of reasons but is nonetheless a misconception.

As you may imagine, there are plenty of homeowners who have more than one mortgage on their properties. Perhaps they took out an equity line to pay for a child’s college or bought a property with 80/20 financing.

There are plenty of these situations and you may be in one and wonder rightfully whether or not you can successfully short sell your property on a second mortgage short sale.

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