WHAT IF I CAN ONLY SELL MY PROPERTY FOR LESS THAN I OWE MY LENDER?

If you are struggling with your home loan and the value of the property is less than the mortgage amount, make sure you explore all options with your servicer, as well as an attorney or a housing counselor. In some cases, REALTORS® can help explain to the lender why it makes sense to sell the property for the best price and then forgive the remainder of the debt. Until recently, the amount of debt the lender cancelled was treated as income when you filed your tax return. REALTORS® and others helped pass legislation that will prevent this tax burden from being placed on eligible homeowners who are relieved of their obligation to pay some portion of their mortgage debt between January 1, 2007 and December 31, 2012. Full relief is available only if the amount of forgiven debt does not exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Other limits also apply; consult your tax adviser or IRS guidelines for details.  Some lenders may require you to sign a promissory note for the difference between the value of the home and the amount owed. Before you sign any documents, seek the advice of a housing counselor or lawyer.