Short sales might be short sighted in the long run!

By
Mortgage and Lending with Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. LMB100023827. NMLS257576.

Short sales might be the only way out for many. But taking that direction may haunt sellers for years (and dollars) to come.

First there is the obvious financial impact of a short sale. The waiting period to buy a new home is at least two to three years and also depends on the loan type. For instance, a new FHA loan can be applied for after two years as long as they were current on their other installments and the mortgage of the previously owned home.

But wait... don't most banks require you be delinquent before they even consider a short sale?? Therefore you need to plan on a minimum of three years after a short sale to even hope to assist them in purchasing another home.

But here's something that may be even more surprising. Despite the Mortgage Debt Relief Act of 2007 some may still owe IRS after all! There were a few exemptions to this act to include:

  • homebuyers that took a cash out refinance and spent the money on something other than home repairs will most likely need to claim the amount of the short sale as if it were earned income.
  • investment or second homes are still subject to the tax liability.
  • multi-million dollar homes are also not covered by the Mortgage Debt Relief Act.

Interesting how this information is suddenly coming to light now that we're deep into tax season, isn't it???

NOTE: always contact your accountant or CPA for issues requiring tax advice.

Posted by

Opinions expressed here are the sole responsibility of the author, and do not necessarily reflect the view of Fairway Independent Mortgage.

Ruth Vogt Colorado Mortgage Lender Ruth Vogt, Sales Manager

 #LMB100023827, NMLSR# 257576

 Equal Housing Opportunity. 

 Regulated by the Division of Real Estate.

   www.ColoradoHomeLender.com

   ruthv@fairwaymc.com  303-881-7849.

 

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Comments (8)

Cynthia Smitherman
Emage` Fine Properties, LLC - Chandler, AZ
DESIGNATED BROKER, ABR, GRI, REALTOR REALTIST

I agree, there is a surprise around every corner in this industry.

Apr 11, 2010 12:23 PM
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

And in California, Gov. Schwarzenegger is not allowing debt forgiveness so people may have to pay taxes on the sale price and the mortgage owned. 

Apr 11, 2010 12:32 PM
Mary Douglas
United Country Ponderosa Realty, Red Feather Lakes, Colorado - Red Feather Lakes, CO
REALTOR, Red Feather Lakes, Colorado

Hi Ruth, There are always consequences for very decision.  I think it's good advice to consult a CPA or tax advisor beforehand.

Apr 11, 2010 02:17 PM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Emage, Surprises for sure!

Jane, I admire him for taking a stronger approach in dealing with debt forgiveness.

Mary, If there is one thing I don't want to be is viewed an expert with IRS issues. There's enough pressure just working real estate!

Apr 11, 2010 02:23 PM
Jackie Connelly-Fornuff
Douglas Elliman Real Estate in Babylon NY - Babylon, NY
"Moving at The Speed of YOU!"

There is always something Ruth. Heaven forbid information is up front from the get-go.

Apr 11, 2010 11:10 PM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Guess if it was clear cut, tax accountants and attorneys would have no job stability???

Apr 12, 2010 03:10 PM
Debi Boucher
Real Estate Showcase Photography - Woodland Park, CO
"Realtor Showcase" - Real Estate Photography/Virtual Tours

I posted on this a while back, too. I think there will be some very unpleasant surprises for alot of folks coming up shortly....

Apr 12, 2010 04:09 PM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Debi, I totally agree. The story is a mystery with what I believe will be a surprise ending???

Apr 15, 2010 02:52 PM

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