Thinking about a Short Sale? Don’t think too long!!

I fall into a large group of homeowners who have been “on the fence” about short-selling their homes during this economic downturn.  The short sale & foreclosure process is a very complicated one, and each transaction has its own set of unique circumstances that sets it apart from the rest.  The decision to short sell a home is anything but an easy one.

I’m writing today to inform the reader of a VERY important change in the law that is taking place at the end of 2012, which should make it easier on homeowners to make up their minds.  On December 31st, 2012 the Mortgage Debt Relief Act of 2007 is set to expire.  For those who haven’t completed their short sale or foreclosure transaction prior to this date, there will be a significant financial impact!

The Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence.  Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.  In layman’s terms; if you have a $350,000 mortgage on your primary residence and the lender agrees to let you sell the home for $200,000 without recourse, the $150,000 “forgiveness of debt” does NOT have to be claimed as income!  In any other loan scenario, it is almost always the case that an individual would have to claim this money as income on their tax return!  Well, that’s exactly what is going to happen when this act expires; individuals who sell their homes for less than they owe will have to claim the difference as income on their tax returns!!  These amounts are often VERY significant, and can result in tens of thousands of dollars due to the government in income tax.

The short sale process is a long & complicated one.  If you are thinking about going down that route with your own home, I would highly recommend beginning the process as soon as possible.  There are qualified third-party specialists that can assist you during the process and negotiating on your behalf, often at no cost to you.  If you have any questions in regards to the short sale process, or the expiration of this Act, please feel free to reply to this post or call Matt at 541.389.7910…. I’d be more than happy to help.

Thanks for reading!