As you might have heard the number of foreclosures, short sales & deeds in lieu of foreclosures have not hit their peak. That may be true. It doesn’t really matter in our area. Why because we do have a lot of them to begin with, and yes we will have some more before it is all over with.

I want to let you know (if you don’t already) that the short sales are only one step above a foreclosure and can hurt the same on the persons credit. Well as buyers we can ‘feel’ for them, but we also want to get a really good deal, RIGHT! By knowing the basics of how they work, we can use that information to drive some hard bargains.

Here is the basic breakdown for the Foreclosure and Short Sale: foreclosured properties are already owned by the bank, and the bank has already set the price for the sale. We can still write offers for less than what the bank is willing to sell it at. When we do this, it might take the bank some time to get a response back (this is called patience) so we wait, if we could get it $10K, $20K or even more below the ‘general market’ so what if it takes a week or two extra to get the answer.

Short sales are when the borrower is trying to sell it for less than what they owe. This means that the borrower has to get it approved by their lender. The lender could take a long time to give a response as well. Some of the time the lender will only sell close to the appraised value. But that is not a hard and fast rule.

For those of us who may have short sales and foreclosures we need to talk to our tax person. All of these have major ramifications on our taxes and income. Here is a basic breakdown of the items I know about:

Primary residence foreclosed: In AZ the banks cannot come after you for the money difference. They do have to give the homeowner a 1099-C (this is required by the tax laws to get it off of their books) you add that to your tax returns but I was told it is not considered income.

Secondary residence foreclosed: I am told it is the same as above

Third residence foreclosed: no breaks no deals

Investment (rental) property foreclosed: they can come after you for the money

If you have refinanced your primary or secondary residence & it gets foreclosed on, the banks can come after you for the money. The banks rarely come after the property owner, but they can.

PLEASE if you find out different, then this,  let me know so I can correct it. ALWAYS talk to your tax person or financial adviser to confirm all of this and for them to figure out YOUR best options.