Short Sales & Tax Relief

Short Sales & Tax Relief

Under the Mortgage Debt Relief Act, unpaid mortgage debt - as much as $2 million in some cases - is not regarded as income and thus not taxable. There's good news for underwater homeowners who are considering a short sale: the tax break has been extended through December 31, 2013.

While recent housing recovery in some markets has seen homeowners regain positive equity, there are still many who remain underwater and may not be able to wait for prices to recover before they need to sell. For homeowners who want to sell but the property value is less than the remaining mortgage amount, there's still time to complete a short sale and get the important tax break.

For homeowners choosing a short sale now, there are number of reasons that can factor positively in a successful closing, including:

• High demand for short sales with the possibility of multiple offers for a single property
• New federal rules requiring most lenders to respond within 30 days to a short sale offer and make a final decision within 60 days
• New guidelines for HAFA (Home Affordable Foreclosure Alternatives) expediting the process by removing some of the burdens on participants in the transaction and standardizing paperwork

Making a Short Sale Work

While short sale timelines have shortened for some markets, you'll want to start the process as soon as possible in order to meet the tax relief deadline of December 31, 2013. First, talk with a real estate agent about your mortgage and any other factors affecting your financial situation. Choose an agent with short sale experience who can help you understand the steps involved in making a short sale work for you, and who will handle the extensive negotiations with the lender that may be required.

All short sales are different but in general terms they work like this: Your real estate agent locates a buyer and then the parties agree to a sale subject to lender approval. The offer package is then submitted to the lender. Before the transaction can close lenders will want to make sure the sale price reflects the best-possible market value.

The lender will review your situation to determine if there's a hardship or other factor which justifies approval. The price will reflect such factors as the condition of the property and the realistic alternatives available to owners, buyers and lenders.

I have experience with a wide range of short sale situations and can help shorten the path to a successful short sale. Contact me today.