Last Call! List Now! Sell in 2012! Some Experts only give 60% chance that your short sale won’t be taxable in 2013!!!
The best explanation I’ve read of the impact of the Bush era tax cuts on real estate is in a CNBC Article on September 28th:
“A short sale is debt forgiveness. Debt forgiveness is taxable. In order to help the huge volume of troubled borrowers and promote more short sales, Congress in 2007 passed the “Mortgage Forgiveness Debt Relief Act and Debt Cancellation.” The debt forgiveness from a short sale or a mortgage principal reduction would no longer be taxable. That act is part of many Bush era tax cuts that expire at the end of this year. Without an extension, short sales would grind to a halt, as might mortgage modifications that involve principal reduction”.
The Article goes on to quote various experts as giving the Debt Relief Act a 60-40 chance of being extended. It is a complex time in the political cycle to deal with a hot potato like not taxing people for the phantom income they receive when their bank forgives a portion of their principal debt obligation. While the Republicans have attacked the Trillions of new national debt accumulated by the current administration, both sides are making bold new claims about moving toward a balanced budget. Listen carefully to tonight’s first presidential debate on domestic issues and the economy and see which side is willing to extend the Bush tax cuts and which side is willing to sacrifice underwater home owners on the altar of moving toward a balanced budget. The realtors and lenders who make a living on the real estate economy have already vetted the candidates on their likely impact on that economy and according to some sources the real estate industry has come out an amazing 80% in favor of the Romney ticket!
The US has to start curtailing its debt, but to do it on the backs of upside down home owners is terrible policy. There is bipartisan support for this idea. For example, one democrat from the liberal left coast broke ranks with the Obama administration and “Rep. Jim McDermott (D-WA), who introduced legislation last March to extend the tax relief for three years said in a release, “Collecting federal income tax on relief intended for struggling homeowners is not only bad policy, but is simply wrong.”
The bottom line is that if you are struggling to pay your mortgage and depleting your savings and retirement to do it, you are taking a gamble with only 60% odds of success that you can procrastinate on short selling your home! If you wait until 2013 to short sell, and if your home sells and nets your mortgage company $100,000 less than it is owed, you could be imputed to have made $100,000 in “phantom income”! For most Americans this would mean an approximately $15,000 tax bill. If you think mortgage debt is oppressive, you do not want to face the wrath and collection efforts of the IRS!!!
Be proactive! Manage your situation under your own terms and time tables. Schedule a meeting with our staff now to know your options. According to one source, 144 of the top 146 metropolitan areas (that includes our area which is in the top 50!) have experienced a nearly 20% decrease in the number of new listings! Maybe the best gift you can give your family this holiday season s to take control of the financial stress in your life! Rates are low, inventory is low, taxes are low for another 89 days and after that you may lose the poker match with the IRS if you lose your home in 2013.