Once upon a time, a short sale of a home was a taxable event. The difference between what the homeowner owed and the sales price of the home would appear on a 1099 as taxable income, adding IRS insult to financial and credit injury.
Then the Mortgage Forgiveness Relief Act was paid in 2007 and, for most homeowners who are short selling their primary residence that write-off was no longer taxable. (There remain exceptions, the most common of which is when a second mortgage or line of credit was taken out and not used to purchase or improve the property – the proverbial “equity cash out” to buy some toys and recreate a Bachelor/Bachelorette travel itinerary.)
That act was extended once and is set to expire in just under five months, on December 21, 2012.
And to the question is, as Clint Eastwood would ask, do you feel lucky? Well, do ya?
Are you comfortable leaving things in the hands of our esteemed Congress and hoping for an extension?
Short sales take time; no matter how much Bank of America, Chase and others talk about streamlining the process, everything still takes time and one intransigent investor – the poor soul who purchased the likely bundled loan once upon a time – can muck up the works in a heartbeat.
Earlier this year, I completed a short sale with Desert Schools for a customer in a couple of months’ time. Last year, we needed four months to get another short sale through Bank of America. Another took three months, also with B of A, with an added detour thanks to an appraisal that came in well below the sales price, necessitating a new broker price opinion to be completed.
If the idea of short selling has even vaguely crossed your mind, this is the time to get on the phone or the contact form and find out if it’s the best option for you.
The clock is ticking … unless you have faith in Congress’ ability to pass up the tax revenue from phantom income on a short sale one more time.
For more information on getting the ball rolling on your short sale, check out our dedicated information at ExpiredtoSoldAZ.Com. You also can find out whether you might be eligible to receive $3,000 when you short sale courtesy of the government’s HAFA (Home Affordable Foreclosure Alternative) program.