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A Significant Short Sale Deadline Will End This Year

By
Real Estate Agent with Mapleridge Realty, CT 203-206-0754 REB.0759001

A Significant Short Sale Deadline Will End This Year

For home owners contemplating a short sale, a significant tax relief benefit will expire on Dec 31. This is important as short sales are not quick transactions and not only must time be allowed for the house to get a qualified buyer, but also the time to approve the short sale by the bank must be factored.

The big benefit to short sale sellers is the tax relief exemption. Under this exemption, sellers can exclude as income the amount of debt on their principal residence that is forgiven by their banks. Unless the law is renewed, after Jan 1, 2013, anyone that participates in a short sale in which the lender allows the home to be sold for less than the value of the outstanding mortgage will have to declare the difference as income on their tax returns. The sellers will be given an IRS form 1099 shortly after closing for this ‘phantom income.

Having a bank allow the sellers to get out from under the strain of a home mortgage due to hardship is a positive. Being exempt from any tax obligations is a bonus.

If you are a Central CT homeowner and are having a problem paying your mortgage, I may be able to help you. Call me for a confidential meeting to discuss your situation.

A Significant Short Sale Deadline Will End This Year

 

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Edward (Ed) Silva
Broker Associate

Serving Central Connecticut Sellers and Buyers

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Do you know anyone who is behind on their mortgage and doesn't know what to do? I may be able to help them. I am an experienced Short Sale Broker

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Comments (17)

Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Ed, let's hope this deadline gets extended for at least couple of years. (It's an Election Year, so...)

Jul 17, 2012 01:11 PM
Sidney Kutchuk - Realty Works Temecula Kutchuk - Realty Works Temecula
Realty Works Temecula - Temecula, CA
Realty Works Temecula

Ed:  Very useful information, I'm suggesting and will re-blog later in the week.

Jul 17, 2012 01:13 PM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
CEO of Vision Drive Realty - Coastal San Diego

Ed, what are your thoughts on an extension of this relief? I've been doing pre-foreclosures long before there was a tax relief, but all the same it's easier with the relief.

Jul 17, 2012 01:14 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Ed ~  Very intersting -- just wondering ... do you have a reference for this legistlation and does it apply to all types of loans?   

Jul 17, 2012 01:17 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Ed, that is good motivation to act before the end of the year.  It would make since for Washington to extend this, but doing things in the homeowners interest does not seem to what Washington is about these days.

Jul 17, 2012 01:25 PM
John McCormack, CRS
Albuquerque Homes Realty - Albuquerque, NM
Honesty, Integrity, Results, Experienced. HIRE Me!

Thanks Ed, I was not aware of this.  With elections coming up I wonder if it will be changed before the December deadline???

Jul 17, 2012 02:16 PM
Juli Vosmik
Dominion Fine Properties - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Ed, here's hoping this much needed relief will be extended.  Personally, if I read of anyone not extending it, I will NOT be voting for that person in the election.  

Jul 17, 2012 02:18 PM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Praful, many a home owner has taken advantage of this. It's a bailout for the little man.

Jane, people need to allow enough time to get out of a bad situation.

Thomas, this relief will cost the Government a pittance against the trillions they gave the banks for getting us into this mess to begin with. I do hope it gets extended

Joan, yes, It's the Mortgage Forgiveness Debt Relief act

George, there are ample opportunities between now and the November elections for people to let themselves be heard

John, it would make great political sense for incumbents running for re-election to make noise about this before the Nov elections.

Juli, many others should have that same mindset

Jul 17, 2012 09:24 PM
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Extending makes sense, many would benefit from it. I'm guessing it will but we still have a long long long way to go educating homeowners who are in default and waiting on loan mods, new laws..Short Sale is the way to go for those who are in default.

Jul 18, 2012 06:53 AM
Carol-Ann Palmieri
RE/MAX Executive Realty, Al and Cal Realty Group - Franklin, MA
"Cal" the Real Estate Gal

Hi Ed.  An important deadline to be conscious of.    Homeowners with short sale or foreclosure trouble should not be taxed on this phantom income.    People need this relief in order to get their financial house back together.  

Jul 18, 2012 10:55 AM
Barbara Altieri
Better Homes and Gardens RE Shore and Country Properties - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

Ed -- I think it will get extended, but nothing is ever a sure thing with the govt. I will reblog in a few days. It's an important reminder and info most short sellers are not even aware of as I am sure you know.

Jul 18, 2012 11:41 AM
Al & Peggy Cunningham, Brokers
RE/MAX West Realty Inc., Brokerage - Brampton, ON
Our Family Wants To Help Your Family!

Sounds like home owners better act fast if they want this tax benefit. December is fast approaching!

Jul 18, 2012 12:09 PM
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

Ed, being an election year, I think this will get an extension. After everything people have been through, this is the least the govt can do.

Jul 18, 2012 01:04 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

My opinion is that it will be extended or replaced with something similar.

Be careful about telling homeowners they qualify for this. Many don't because they refinanced and pulled cash out to spend on other things.

Also, even if the debt relief act goes away many homeowners will still be able to avoid paying taxes on this "phantom income".  They may have to claim the income but also remember they have just taken a huge loss. 1-1 still equals 0

All short sellers need to seek competent tax advice. They may find that this is really a non issue.

Jul 18, 2012 01:38 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Ed - This is such an important deadline for distressed homeowners to understand and be aware of.

Jul 18, 2012 03:58 PM
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Ed, not much time left. I agree with Bryant comment #15, short sellers need to seek competent tax advice. 

Jul 18, 2012 05:12 PM
Barbara Todaro
RE/MAX Executive Realty - Happily Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning, Ed.... if this benefit is not extended, foreclosures will skyrocket.... the mess will thicken....

Jul 18, 2012 10:34 PM