Posted by JT-IN on August 30, 2003 at 22:49:37:
Forget the advice of the RE Agent, as they clearly haven’t a clue what they are talking about here.
Let’s say you bought a house for 50K, and sold it for 10K… you would write off the 40K loss against the next 40K of profit, so now you are at 0 profit. Is that being able to deduct it… maybe not, but it is called expensing. In the case where other profits aren’t available to offset any loss, then the loss carrys forward to the next year and offsets the next profit. This is exactly what the Lender would do in this case.
Jr. liens are highly vulnerable to receive nothing in a default situation, and most, (not all) will negotiate for a lessor payoff; hence the short sale idea. I use this technique fairly often to either short the lender or purchase the note or judgment lien. It is a killer technique, and can add lots of profit to an otherwise undoable, or marginal deal.
Unfortunately, most RE Agents aren’t investors, nor do they understand what or how to go about the task of investing. When you run into someone who isn’t in the game, they are rarely the party to listen to for advice.
Just the way that I view things…