San Jacinto, CA asked in Real Estate Law for California

Q: The property went to foreclosure. We purchased the property in $435k, now is $360k. Do we still own the difference?

We had two loans for this house. The first one, was modified and the second was left. We didn't know until, the amount went to collection". The bank had asking us to pay $86k immediately. We did not have the money, that's way we forced to sale the property, but our realtor didn't help us correctly.The property went to foreclosure", thanks to this realtor. Now we are wondering if we have to pay this amount. We know, we have to claim it in our tax as a"profit", because we have a second property where we live in.

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1 Lawyer Answer
Richard Samuel Price
Richard Samuel Price
Answered
  • Redlands, CA
  • Licensed in California

A: Whether or not you owe the difference depends upon a few factors. If the loan was for the purchase of the home and you lived in the home as your primary residence, then you will not owe the money. If the mortgage was foreclosed in a nonjudicial foreclosure, then you will not owe the money.

You'll receive a 1099 in the mail from the mortgage company for the amount of debt that was forgiven. While you have to report that amount on your tax return, you may not owe a tax because of Internal Revenue Code section 108 where you can exclude that amount from income if you are insolvent.

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