Will I Owe Taxes After A Short Sale? | REALTOR Short Sale Designation

WARNING: Unless extended the much lauded Mortgage Forgiveness Debt Act expires end of 2012. If you have underwater owners on the fence about when to list their homes as a Short Sale (to avoid a foreclosure) they must act before its too late…

….there is no guarantee the the Forgiveness Act will be extended into 2013. Bottom line, take action now!

From MarketWatch.com

Thirty-five percent of current clients surveyed by YouWalkAway.com said that they’re walking away from their homes sooner because of the upcoming expiration of the Mortgage Forgiveness Debt Relief Act at the end of next year, according to a news release from the company.

YouWalkAway.com markets itself as an authority on foreclosure laws and consequences, which helps underwater homeowners “take control of their financial future,” with many of them deciding to walk away from their home and allowing it to enter foreclosure.

The Mortgage Forgiveness Debt Relief Act gives tax relief to homeowners who have sold their home via short sale or lost their home to foreclosure. It takes about a year to complete the foreclosure process, the company says.

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“The survey results are not surprising; YouWalkAway.com has seen a number of homeowners reach out to us due to the impending 2012 deadline,” said Jon Maddux, chief executive of YouWalkAway.com, in a news release. “Many are deciding to begin the foreclosure process sooner rather than later in order to ensure their foreclosure is complete by the end of 2012.”

Read more real-estate news in this week’s pages, including the latest results of the Mortgage Bankers Association’s quarterly mortgage delinquency report. Plus, read about the latest mortgage scams and find out details of government’s revamped Home Affordable Refinance Program in this week’s Realty Q&A.

“Today, about 80% of the people who come to me inquiring about foreclosure tax ramifications qualify for tax relief under the Mortgage Debt Relief Act,” said Cheryl Gerhardt, a CPA who has worked with some YouWalkAway.com clients, in a news release. “These are usually people who purchased during the height of the market from 2005 to 2007 and never had the opportunity to take out a second, whereas a few years ago clients who were getting foreclosed upon had made purchases in the early 2000s, took out a home equity line of credit and could not qualify.”

If the expiration of this law is, indeed, a factor in people choosing to walk away from their homes sooner rather than later, it will interesting to see how it plays out in the foreclosure numbers in the year ahead.