Legal Question in Real Estate Law in Illinois

Re: short sale

A short sale is a sale that fails to provide enough money to pay the remaining amount of the mortgage AND the creditor has forgiven the unpaid portion of the mortgage. Therefore, if you have a short sale, and because of the forgiveness aspect, the lender will not come after you for the unpaid amount of the mortgage.

HOWEVER, the allowance of a short sale is entirely up to the lender. If they do not approve a short sale, there is an amount owing and they can collect that through any legal means. This would include placing a lien on any other property that you might own, such as a residence, car, boat etc.

While there is a possibility of government assistance in mortgage foreclosures, don't look for it in terms of rental property and don't look for it if you are unemployed.

I feel that you might want to consider bankruptcy while there is still time. Bankruptcy will not do much, if anything, protect a property ALREADY in foreclosure, but may be of some value in protecting property not yet in foreclosure.

Tax consequences: By this I presume Income Tax consequences because property taxes now owing will be collected. Period I advise you to consult a tax attorney or other specialist. While I know that there is "favorable" tax treatment for a residence which has been the subject of a short sale, I doubt that the tax treatment of income property is a favorable.

Re: short sale

I believe your options are short sale, deed-in-lieu, foreclosure or bankruptcy. All of them will affect your credit to some extent. The lender may or may not forgive the debt if you short sell. That doesn't mean they'll necessarily come after you though.

Re tax consequences, my understanding is that you WILL have income tax consequences: i.e., the deficiency (difference between what you owe and what they'll accept) is considered income if it's not your residence, crazy as that sounds. Although I don't usually suggest it, bankruptcy may be your best alternative, especially if you have additional debts.

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