Many homeowners are “under water,” meaning they owe more on their mortgage than their house is currently valued at. Some homeowners are choosing to wait for property values to return to normal levels, but others cannot wait for that to happen. They need to move for various reasons, or they simply cannot afford their mortgage payments any longer. So what are their options? They could allow the bank to foreclose, do a Deed In Lieu Of Foreclosure or participate in a Short Sale. In the first two options the homeowner must walk away from the property, and the bank that holds the mortgage becomes the owner of the property. In a Short Sale, the homeowner markets the home for sale, and negotiates with the bank (usually with the help of a Realtor) asking them to settle for less money than is owed to them. The home is sold to a new Buyer, and the Seller is able to get on with their life.
So why is it so important to do a Short Sale this year? Simple: When you do a Short Sale, the amount of money you are forgiven is considered income. We must pay taxes on our income. In 2007, Congress passed the Mortgage Forgiveness Debt Act, which allows homeowners to participate in a Short Sale through the end of 2012, and not owe federal tax on the forgiven debt. There are certain situations where this does not apply. For example, the property must be a primary residence. You can learn more about qualifying on the IRS Website, or by talking with a foreclosure or real estate attorney.
Currently, we are in market where houses are talking longer to sell. Also, the Short Sale process takes longer than a traditional sale because the homeowner must submit documentation to the bank when they ask the bank to take a loss. Then the bank needs time to review the documents and decide if they are willing to allow the Short Sale. Don’t wait until it is too late to start the process. Sit down with a Realtor that has Short Sale experience, figure out if you will qualify for the tax break and then make an informed decision. We have experience in Short Sales, and are happy to sit down, walk you through the process and answer any questions you may have.
Tags: buyer tips, colleen kuchta, current housing market, Foreclosure, home seller tips, homeowner market, homeowner tips, living in milwaukee, milwaukee lifestyle, new home buyers, real estate market, real estate trends, seller tips, Short Sale