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  1. #1
    Join Date
    Jan 2012
    Posts
    2

    Default Responsibility for Deficiency and Taxes After Foreclosure

    My question involves a mortgage in the state of: New York (long Island)

    Situation: House has been up for sale/short-sale for over 1 year. No missed or late payments. House was primary residence but had to move for work. For 5 years it has been either a rent-to-own or a rental. With current renter, the monthly loss is about 2600 or about 31k per year.

    If short sold, or auctioned, I believe the deficiency would be in the range of 60-85k.

    I have decided to stop paying the mortgage. Even if I had to pay 1000 per month to pay off the deficiency, I would be better off.

    The RE agent and short sale lawyer have advised against stopping mortgage payments, but I have advised them that next month they will be stopped. Obviously they would prefer a short sale no matter how long it takes.


    Questions:

    When the house is foreclosed upon, will I have to pay taxes on the deficiency once the house is auctioned?

    Do I need a lawyer for court dates and to negotiate for me if they peruse the deficiency? I cant seem to get a lawyer to do this, they make it sound like there is no work to be done. Should I offer to prepay for their services?

    If I have to pay some or all the deficiency back, will they force me to sell other property in another state?

    Is there anything I should do prior to missing the next payment?

  2. #2
    Join Date
    Jan 2012
    Posts
    2

    Default Re: Responsibility for Deficiency and Taxes After Foreclosure

    Also, I just reapplied for a deed in lieu. With a year of being up for short sale, it looks like it may finally qualify for deed-in-lieu. This route, or with a foreclosure, it seems like I would want a lawyer to negotiate deficiency payments?

  3. #3
    Join Date
    Jan 2012
    Posts
    2

    Default Re: Responsibility for Deficiency and Taxes After Foreclosure

    I am not an attorney but have gone through foreclosure in Florida and am currently being sued for a deficiency.

    Comparing your situation to mine, you are a LONG way from a deficiency suit. I'm nearly four years from the foreclosure judgement, four and a half years from Lis Pendens and it's been almost a year in the deficiency case. If you can afford the payments, keep making them. A short sale would be WAY better than foreclosure.

    The best advice I could give you would be to have a real estate attorney look at your note and mortgage right now (before you go late). My mortgage was not properly notarized and if I had noticed it during the foreclosure suit I may have had grounds for dismissal of the foreclosure suit.

  4. #4
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: Responsibility for Deficiency and Taxes After Foreclosure

    As this is no longer your primary residence, but is an investment property, you can end up paying taxes on the deficiency.

    I'm not sure that it would be a good investment to hire a lawyer to try to negotiate a deal for you, but you can call around and see what local lawyers are charging for that type of service. Having the documentation reviewed for irregularities is something of a long shot, but these days some really wacky things are turning up in title histories - and sometimes the servicer can't even prove who owns the property.

    If you get a deed in lieu with their agreeing to waive the collection of a deficiency, that would protect you from having them later attempt to pursue your assets.

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