My Property info.....paid 215K in 2005...was negative 500/month for 3 years then proceeded with the Short Sale. Its a condo in Florida.

My short sale was approved. I am dealing with 2 banks (primary lien holder is owed 172K, secondary lien holder is owed 32K). I have a buyer for 79.9K. Lien Holder 2 was paid 3K by Lien Holder 1 and is releasing their lien. Lien Holder 2 is going to come after me for the balance of 29K. I was expecting this. We will eventually come to agree at some # and they will get paid and eventually go away.

I am dealing with a "Short Sale Specialist" He is not charging me. He teaches courses on Short Sales and is doing this for free so "he can stay fresh on the ins and outs of the Short Sale Business" His wife is the Realtor. They will get about 6K in commissions.

I was under the impression that the Primary Lien Holder would accept the sale and hit me with a 1099 for the deficiency. My short sale specialist is telling me that this is not the case. Here is what he said:

"It is not a cut and dry process -

The DEFICIENCY BALANCE is collectible. The bank has the right to pursue all legal remedies to collect that debt. Sometimes they collect on it internally...Sometimes they sell it to a 3rd party collection agency...Sometimes they send it to an attorney to collect...Sometimes they sue the debtor for the deficiency. I cannot tell you what they will do with the deficiency balance. If, at any point in time in the future, the bank determines that the debt is not worth collecting, they will then "write it off" and send the 1099 - thus, they are not doing BOTH - they were unable to collect on it so they sent the 1099...If they collect on it, there is nothing to write off - no 1099"

I am very uncomfortable about this. I thought that when I sign on the dotted line that I would know exactly what my future holds. So the bank gets 79.9K, My short sale specialist and his wife get 6K.....I get out of the property BUT now I may still owe Bank one approx 93K and Bank two 29K. I can get screwed.

They have my financials, I am in the red.

My questions are. Is my short sale specialist correct? Should I move forward with this?

Your input is appreciated. I need to make a decision soon!

I should also note that I live in NY. It doesn't matter that the property resides in Florida. NY is a non debt forgiveness state. They can and will come after me.

Thanks

short sale went through today. So I have 2 fights ahead of me:

1. the 1099 I am expecting to receive from the IRS for the written off balance from bank 1 (172-80 = 92K).

2. The unforgiven deficiency balance on the 2nd. Its now 33K including Lawyer's fees.


From my understanding I have to sit back and wait for the 1099. I should expect to get it 30-60 days after closing. I was told that I can fight this 1099 with IRS Tax form 3648. I haven't looked at the form yet, but I was told its a form that helps you prove your insolvency. In the red every month, which I am. I am not sure how this is going to pan out. I dont know if the IRS will see my #s and forgive it or reduce it or force me to pay it.


As far as bank #2 goes. The process has already started. I was proactive in contacting them first. I gave them my financials, that show I am in the red -1400/month. My plan is to have them come after me; take me to court. Let them spend $ to get $ out of me. I was told they will want to settle. The question is for how much? The reality is i am upside down every month, I do own a primary residence with zero equity, i have no cash in the bank. I do have a job and a 401k but they will have to take me to court to garnish my wages or touch my 401K.


What is everyone's best educated guess on how both of these items will turn out?

thanks