Reply to What I don't get: When people complain that they are drowning because their house is underwater

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[quote=Anonymous][quote=Anonymous]
What about if one does a short sale on their house, in VA? Are you still responsible for the difference? I am in a position where we are upside down in our mortgage and need to move due to family issues. Dont know what we are going to do.[/quote]

No, the point of a short sale is that the bank agrees to accept less than the amount of the mortgage note for the sale of the property.  So they've accepted the loss.  At that point, you are only responsible for capital gains taxes on the difference between the sale price of the home and the balance of the mortgage at the time of sale.  The amount that the bank forgives is considered profit for you.  If you strategically default on the loan and they foreclose, first you will be taxed on the capital gains of the difference between the foreclosure sale price and the amount of your note (that is capital gains for you).  Then if the mortgage company chooses, they can sue you for the loss, i.e. the difference between the foreclosure sale price and the balance on the mortgage note.  I don't know for certain, but I've heard that banks generally won't bother for less than $100K loss, but suits for strategic default are becoming more common as loan holders have to come up with a way to recover a lot of  lost money due to the sheer volume of foreclosures in the housing crisis.  Especially as they are being lambasted by some of the more creative ways of making up income (e.g. BoA fees), where states allow, they are becoming more common.

I would definitely try to work on a short sale if at all possible.  And do not believe a realtor that you should list as a short sale before clearing with the bank.  I can tell you that realtors experienced with short sales will ask FIRST if a short sale has been approved by the bank and if not, they generally don't bother bidding.  However, short sales that have been cleared by the loan holder get bids.  I tried to bid on a home like this but was told that bids were closed because there were already six bids on the property...and that was PG County.  So, you need to write a letter to your bank about the need, and beg their mercy to approve a short sale.  For this, you want to get a listing agent who has successfully SOLD more than one short sale property as they will be able to provide you experience with how to apply and then appeal (if necessary) the bank's decision to approve a short sale.  Good luck.  Do this as soon as possible as the first reply from the bank will take months.[/quote]

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