Seller's 1099 Concern Prohibiting Her From Doing A Short Sale

[Ibrahim Hughes]

Hi All. I have a seller who doesn't want to go through the process of short selling two abandoned investment properties because they don't want to get a 1099 from the lender and pay taxes on the forgiven debt.

What can I say to her to assuage her concerns? The properties were NOT her principal residence.

I would like to let her know that her bigger concern should be a deficiency judgment against her primary residence should the lender decide to pursue one? Are lenders pursuing more of these lately?

Also, there's the personal liability of someone getting hurt in or on the property which again could turn into a lawsuit and judgment against her personal assets.

Plus isn't there a possibility that the 1099 can be negotiated away during short sale negotiations?

[Steve Babiak]

In your area, can a deficiency judgment occur after the sheriff sale? If so, then there is no way to avoid it happening by doing nothing - so it makes sense to try to get more for the property to lower the deficiency amount. The 1099C could occur in either scenario if that is the case.

Does this seller have assets other than the two properties here that might be targeted by the lender to cover that deficiency amount?