Pitfalls of Mortgage Cancellation Tax Relief Act, H.R. 3648

Frank, I agree with your thoughts here.  I'm sure there can be some compromise to help these people in dire financial situations while still maintaining decent home values.  Interesting stuff, especially since I may have a short sale listing coming up pretty soon.

I am not to sure I agree here Frank,  You have someone who can't afford to stay in there home so they have to take give the home back and pay a penalty to the government for this privilege, this is only going to put them further in debt.

I don't see this leading to more short sales as they aren't going through this short sale process to save any tax dollars, they just can't afford the payments on their home.

Frank,

Right on!  Shame on the buyer who wasn't smart enough to realize he or she couldn't afford the place at the outset...who now penalizes me (who did do the math) because of the bailout, and consequently, my property value is deluted. 

That was my thought exactly. 5 years - that would make it manageable. Now - how do we get that idea out there?

 

I thought that you can already pay if off within 5 years???  Maybe I was misinformed.  I think that the tax relief should be by individual basis.  If I have a client who is doing a short sale due to a situation that was unexpected such as severe or terminal illness or child's terminal illness, (which I have had clients with this situation, even with health insurance they are paying bills over $30K and used equity in their homes) it still prevents the foreclosure and the forthcoming bankruptcy and other debt gets paid instead of easy way out with a Chapter 7,  then it should be considered.  What about the client who was never told what ARM is??? Do they have to suffer the consequences even though they were not educated or explained anything in the mortgage process and they trusted their mortgage broker (who is now being investigated by Feds).  I really think that certain individuals should be able to "be approved" for the tax relief.  Maybe a process that if the lender, agent, appraiser, and/or any other professional was involved in their deal and they are being convicted of fraud, then those individuals should have the relief and more.

IRS form 982 boys and girls!  There is no phantom taxas long as the borrower is insolvent and can prove it in part or whole and the amount of tax due is directly related to that.  Bankruptcy is defined as financial insolvency, so there is no tax if a chapter 7 was filed and discharged.  If a bankruptcy was not filed a foreclosure/short sale situation is a pretty good start so even a half brained tax person should be able to understand the code and mitigate or redue the burden.   You can Google the IRS Code 982.  the new bill is just smoke form 982 has been around at least since 95

A short sale is the next worst thing on someones credit next to foreclosure or bankruptcy  If your client does a short and they can't afford the tax liability have them file a bk then its a wash.  Look no ones giving them a mortgage for at least 2 years whether its a short, bk for foreclosure.  The clock will actually start faster for good credit after a ch 7 discharge. 

Again you need not file bk to use form 982 you just need to prove that your in the red financially so clients can use this form to wash their tax liabilities under the guide of an accountant.

Consult a professional tax person, real estate attorney or the sort and that you will know what is best for you.  Being in a short sale is not something people are standing in line to do, this is something that is forced upon due to a hardship that you are experiencing.  I think there should be relief somewhere in this vicious cycle to help the owner start over and not just fall below the ground just because the economy or a hardship put them in a bad place.

Families having to move during the holidays, winter months or any time is bad news. If they could not pay their house note, how in the world will they be able to pay their tax bill?

Hello Frank!  I believe your post makes sense and I agree with your comments.  I do not specialize in short sales and recently was introduced to the fact that they are much more work then they are worth.  So, most of this stuff is over my head....as I have decided to refer my seller's to other associates that specialize in this market area.  But, your blog was very interesting to me and it surprised me to see NAR going the other way...I would be interested in knowing their reasoning behind the support.

Thanks Again! Moriah Martin

GOOD NEWS for realtors who are helping home owners working through short sale.  The government just passed a new law that went into effect end of January 2008 to help with phantom tax.  Government will forgive phantom tax on your primary residence.

You can see the track record of the bill that was passed by visiting:

http://www.govtrack.us/congress/bill.xpd?bill=h110-3648

 Sung-Soo Kim
http://www.callhugh.com/

Excellent information I will forward it if that is ok? thank you!!!