You may or may not have heard about this new law that was passed by Congress and signed into active law on December 20, 2007. This new law which is effective for 2007 through 2009 is going to benefit a lot of people who may be in over their heads with their mortgages especially in this declining market. Click here: H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007 (GovTrack.us)
Basically the law says that a property that is a principle residence which is sold as a short sale through 2009 will allow the debt to be forgiven and not taxable as 1099 income. This taxation was seen as an unfair blow to homeowners who were already in financial trouble. There are certain stipulations regarding the law such as whether or not the loan is purchase money (has not been refinanced other than for certain property improvements which may be approved) versus a refinance.
Another thing to consider is that a short sale can affect your credit negatively, but not nearly as negatively as a foreclosure. And the sooner you eliminate this debt problem, the sooner you can be on your way to recovering from the situation. Here is an article from CBS regarding how one advocate shows a short sale versus foreclosure affects your credit rating. Click here: Dual Upside To Foreclosure Alternative, Ray Martin On How "Short Sales" Work; Says They Can Help Homeowners, Buyer
If you own a home as your principle residence and find that you cannot sell your home to cover your mortgage debts or cannot make your payments, you may be able to qualify and benefit from this law. I am not a accountant or an attorney and cannot give you professional tax or legal advice, but it is my job to give you all the information I know so that you can make an informed decision regarding the sale of your home. Each situation should be considered on a case by case basis. It is important to have an experienced agent and escrow team to guide you through these types of sales, and I have the team to support you to that end!!
Contact me, Susan Manning, at 951-551-7790 or www.eTemeculaRealEstate.com for more information. Thank you!
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