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    Selling condo AFTER discharge?

    I filed ch 7 and was discharged 03/2011. I have a condo in AZ (I live in CA) that I had the intention of walking away from. I received a 1099-a for it as well as 2 deeds of release and reconveyance from the bank (the mortgage was 2 HELOCs). I was under the impression I was no longer the owner. However, I received a summons for unpaid HOA dues and when researching the situation, I found out that I am still the owner of the property and the ONLY liens on it are from the HOA.

    Is it possible to pay off the liens (if i come up with the $$) and legally sell the condo without recourse? An escrow officer says so. My attorney didn't give me many answers and I have an appt to speak with another one but wanted to see others' experience, if any.

    Thanks!

    #2
    So you are saying your 1st mortgage has released its Deed of Trust against the property and so has the 2nd? Do you have a copy of both of the recorded Deeds of Release and Reconveyances? Are you also stating that, after verifying the releases of BOTH liens, the only lien is the one held by the HOA? What about property taxes? Have you been paying those or are those delinquent also?

    If the property is worth in excess of ALL recorded liens and encumbrances, selling it to get your equity out makes absolute sense. If there is no equity in the property then simply walk away EXCEPT - your bk lawyer should have told you - you are 100% personally liable for ALL HOA fees, assessments, charges etc. that are run up from the day you filed bk until the day title to the property transfers to someone else.

    If you decide to sell the property you need to make sure your bk case is closed. A discharge (entered in 2011) does not mean the case has been closed - although, if you were a no asset case it probably is closed. But, you better make sure before you list the property for sale.

    Des.

    Comment


      #3
      Des,

      thank you, this is the best information I have received yet.

      I never had a 1st mortgage. It was always 2 Equity Lines (another story but they did this to avoid me paying PMI). Regardless, yes, I have both recorded Deeds of Release and Reconveyance (original with stamp). I had an escrow officer research the property and she told me the only liens on it are from the HOA for unpaid dues from day after filing until now. Property taxes are only 500 dollars behind. Best case scenario, we find a way to pay off liens, and sell property because we will make money. I just want to know if this is allowable, which is why I'm talking to another attorney in AZ because mine hasn't responded. How do I know if my case has been closed? It was an easy, no asset case.

      What DOES concern me, is that I received a 1099-a for acquisition or abandonment of property dated October 2011 but the Deeds of R and R are dated 2/2012.

      Thanks again!

      Comment


        #4
        .

        Comment


          #5
          How do I know if my case has been closed? It was an easy, no asset case.
          If you do not have a PACER account, you can call the clerk of the court. He/she can check using your SS # or case number.

          What DOES concern me, is that I received a 1099-a for acquisition or abandonment of property dated October 2011 but the Deeds of R and R are dated 2/2012.
          The release of the lien is different from the release of the debt. The 1099a is a notice that the lender has abandoned its collateral. A lender can issue both a 1099a and a 1099c. Since you discharged the debt in a bk you should not have any tax consequence for the release of the liens or discharge of the debts. For further info as to what the IRS instructs the lender to do, go to:



          Now, will you have to deal with some type of capital gains tax when you sell?. . . I cannot say. Maybe HHM can chime in. You certainly will want to discuss this with a CPA.

          Des.

          Comment


            #6
            Something is simply not adding up.

            Did you pay the HOA when you received a summons? Did you pay off the HELOC's, or did you simply get a Deed or R&R?

            I question whether you are still really the owner of the property at this point. If the HOA foreclosed its lien (hence, the summons you received), I believe AZ is like most western states when it comes to HOA, the HOA is a super priority lien. If it forecloses, it will destroy inferior liens. Now, normally, when the HOA goes to foreclose, it must notify all other lien holders, and usually one of them will pop-up and pay the HOA so as not to lose their priority position. Maybe that didn't happen here (or maybe the HOA didn't follow the procedure properly). So, maybe the HOA foreclosed, you got the Deed's of R&R from the HELOC lenders because they didn't contest the HOA foreclosure, and the HOA bid it's own lien.

            Before you do anything, I would suggest consulting with a real estate attorney in AZ, and probably pay some money to have that person figure out where you stand

            In any event, if you received a 1099-a, there is a Cap Gain tax issue you will need to address. Presumably, (since you live in CA and the condo is in AZ), the condo is not your primary residence, and probably hasn't been for quite some time. Your bankruptcy does not release you from this potential cap gain issue. What you are looking for on the 1099-A is the number in box-4. (the fair market value), if that number is more than what you paid for the property initially, you have a capital gain. (no need to get into the tax baiss at this point...the publication explains that, but if you have been depreciating the property on your taxes, that will reduce the acquisition number and create a larger cap gain). E.g. let's say you purchased the condo $50,000, 8 years ago. The condo was never your primary residence. On your taxes, you have been depreciating the condo at $2,000 per year. The bank forecloses and sells the condo for $100,000. Your "adjusted basis" for cap gain purposes is $34,000. So, you would liable for CAP gains on $66,000 (even though you didn't actually realize that gain).

            Comment


              #7
              HHM,

              Thanks for the info, and I agree, something doesn't add up. I find it hard to believe that they would just send me the deeds of release and reconveyance and basically surrender it back to me (maybe clerical error or does it have something to do with the fact that I have 2 HELOCs and no real first mortgage?).

              About the 1099-a, when I filed my taxes earlier this year, turbotax "recommended" this was not something that needed to be entered into the software (maybe my error), so that probably means I need to go back and amend that return, right? The fair market value is less than the balance of principal outstanding.

              As for me being owner, the title vesting shows me as the owner. Are you saying that the HOA is planning foreclosure and sticking me with the bill and until I pay them they won't foreclose?

              I have a telephonic consult with an attorney in AZ. Any specific questions you all think I should ask?

              THANKS A LOT!

              Comment


                #8
                Let's not confuse things here...HELOCS ARE mortgages insofar as a HELOC takes a security interest in real estate. So, which ever HELOC you took out first would be a 1st mortgage in that that HELOC would have priority over the subsequent HELOC. I think what you mean is that you no longer have a mortgage against the property that was taken out to purchase the property. That is not really the issue.

                On the 1099-A, the principal outstanding is an IRRELEVANT number. Cap gains is the difference between the purchase price when you bought the house, and the fair market value when the house was sold/foreclosed/abandoned. People really get tripped up (and the IRS publications are not exactly helpful on this point), between the issue of a 1099-A and 1099-C. The 1099-C deals with the amount of debt involved and the tax related to forgiven debt income. The issues are entirely separate.

                It is not unheard of for banks to make mistakes and send a Deed of R&R, I don't think you are the first person to have this problem on this forum.

                My guess is, the consult will not be very informative because the attorney will need to spend some time researching the issue. So, be prepared for that. He/She will probably say, yes, this sounds odd, I am going to need to do this and that to figure out, here is how much that will cost. Or perhaps, there is something specific to AZ and the attorney will know right off hand the situation (although I doubt it).

                Comment


                  #9
                  Yeah, you're absolutely right. I was hoping for it to be a little less complex. Probably why my bk attorney didn't really respond too much to this situation. My main concern is not getting a default judgement against me from the HOA summons. I can't appear in AZ and although the court said I can fill out a motion for change of venue, I don't think I can (debt was incurred there). I guess my questions to the attorney will be more focused on how to answer the summons then. Like is it worth fighting, countering, settling, etc?

                  Thanks, HHM and Des, huge help in clarifying.

                  Comment


                    #10
                    Well, whether you can change venue is a different issue. I bet you probably could, the fact that the debt was incurred there and the property is located there are merely factors in making the determination. But that issue is too much of a side show for this forum. Please let us know what you find out.

                    Comment


                      #11
                      will do.

                      Comment


                        #12
                        Originally posted by atrain55 View Post
                        .Is it possible to pay off the liens (if i come up with the $$) and legally sell the condo without recourse?
                        Putting aside for a moment whether somebody at the bank made a mistake: If the HELOC liens have been released and you are the record owner of the property, you can sell the property. You don't have to come up with the money to pay of the HOA and tax liens first as long as the sale price is enough to pay off the liens. The existing liens of record can be paid out of escrow from the proceeds of sale.
                        LadyInTheRed is in the black!
                        Filed Chap 13 April 2010. Discharged May 2015.
                        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                        Comment


                          #13
                          Originally posted by LadyInTheRed View Post
                          You don't have to come up with the money to pay of the HOA and tax liens first as long as the sale price is enough to pay off the liens. The existing liens of record can be paid out of escrow from the proceeds of sale.
                          True, but I'm concerned that HOA would force a sale or foreclosure if it's not selling. I guess making payments may delay that, though.

                          Comment


                            #14
                            So I spoke to the attorney yesterday and he actually had some good information for me. He also said for this situation, I probably wouldn't even need an attorney. He mentioned a few things like how outrageous the fees are that they are demanding from me (mostly attorney costs and legal). He did say that from what he reviewed, the bank DID turn the condo over to me and I was free to do what I wanted with it. I'm under the impression the bank thought it wasn't worth their money to deal with the condo, liens, etc for how low the value is.

                            About the HOA, he says I can call the attorney and ask to settle but he said they could just say no or ignore me altogether and if I answer the summons and try to fight it they may drive up attorney's fees even more and if they win it could be costly.

                            I spoke to a friend who's a realtor in AZ and she said that the tax records show the HOA selling the condo to ME???? She says normally, in these situations, the lender will be the seller and the buyer would be me but in this case it's the HOA. (ANYONE SEEN THIS?) I guess something else I need to have the attorney review.

                            So I feel a little better because the attorney said even if they do get a judgement, they probably will sit and wait until I sell it to collect the fees, which is all they really want anyways.

                            Comment


                              #15
                              Sounds good. Overall that is a very interesting and unique development. It is rare, although not unheard of, for a mortgage lender to simply abandon the property.

                              I think it will still be a bit of mess once a title insurer gets their hands on it (when you try to sell it), but hey, might as well try and sell it.

                              Comment

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