Short sale’s dreaded tax bite

REThink Real Estate
Published on Feb 12, 2009

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Q: I'm employed in the real estate industry, which means I'm no longer employed. I would love to keep my house, but have no income right now and I have not made a mortgage payment in five months. I understand that my lender will not likely modify my loan until I find another job. Based on that, I would like to put my house up for sale and do a short sale, but my lender said they will issue me a 1099 and that the mortgage debt they write off is taxable income to me! I can't afford to pay taxes on hundreds of thousands of dollars. And what happens to all the back property taxes I owe if I do a short sale? Do I have to pay them?

A: Many of the very best Realtors and mortgage professionals have taken pay cuts or lost their jobs due to the recent changes in the market. One of t