What is a deficiency judgment? What are the tax implications of a short sale
I am a short sale specialist in Brevard County, Florida. I've been learning about and working on short sales before I even got my real estate license. Back then, the average person didn't know what a short sale was and most realtors had no idea either.
Times have changed and because of the dramatic decline in Michigan real estate, a lot of people have lost a significant amount of equity in their homes. This has made the short sale an attractive option to many people seeking to sell their homes. However, it has also lead to a lot of misconceptions and misinformation regarding what a short sale is and some of the other issues involved.
The most common questions I get are regarding deficiency judgments and the tax implications involved in a short sale.
There is a difference between a DEFICIENCY and a Deficiency JUDGEMENT. When you sell your home for less than what you owe in a short sale, that difference is a deficiency (example: you owe $200k on your home and you short sell it for $100k- your deficiency is $100k). A deficiency judgment is a court action taken by your lender against you to recover the deficiency amount. A short sale will help you avoid this action due to the fact that negotiations happen before this can occur.
Here are some links regarding the mortgage debt relief act and the tax implications of a short sale:
http://www.irs.gov/irs/article/0,,id=179073,00.html
http://www.irs.gov/individuals/article/0,,id=179414,00.html
http://www.irs.gov/taxtopics/tc431.html
Although this is great information, it is always advisable to consult with a tax professional regarding your own particular situation.
As always, if you have a question or would like a private consultation regarding your own property please contact my office at 321.914.4409 or email me at: avery@spacecoast1.com. I am here to help!
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