More details to this question:
Hi- I am soliciting legal advice on a property I own in Arvada. It was once our primary residence but is now a rental. We are upside down on the rental property and have considered pulling equity out of our residence to cover the cost of selling the rental property, but the house has structural issues and we are afraid after pulling equity, trying to sell, we would be unable to because it wouldn't pass an inspection. What are the financial ramifications of foreclosure, specifically; would we need to pay taxes on the money we foreclose for (is it seen as equity), could the bank come after the equity in our primary residence, if we are sued by the bank could we settle and only have to pay part of the lost assets?
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Ms. Bielak,
That is a a very complex question and involves more than legal advise.
I do not understand why you would need to spend from your equity prior to the sale. I could see that at the time of sale closing you may need to bring money to the closing to complete the sale.
Foreclosure, refinancing, and bankruptcy all come to mind as possible solutions. If you allow the rental to be foreclosed upon and it eventually sells for less than the balance of the loan, you will likely be presented with a 1099 for income based on that shortage amount. However, the lender from the rental house could not force you to sell your primary residence to cover the shortage.
I hope this helps.
Call me for a free consultation if you need more information.
Don Eby
303-688-0944
Answered on Apr 11th, 2013 at 3:30 PM
Call Don at (303) 688-0944 or email at Reception@RobinsonandHenry.com This information is provided AS IS; and does not create Client Relationship.