It looks like if you need to do a short sale, the government will forgive the debt until the end of 2012. Before short sales became so prevalent, homeowners used to owe Uncle Sam for doing a short sale on their property. For instance, if you owed $250,000 and sold for $200,000, that $50,000 difference would be considered income and sellers would pay taxes on that amount as if they made it in the form of a paycheck. It would most likely put sellers into a new tax bracket with money owed to the IRS at tax time for doing a short sale.
For the past few years that tax burden has been forgiven and was scheduled to expire in December 2009. The good news for homeowners who are doing a short sale on their primary residence, is this tax forgiveness is being extended through 2012. If you need to do a short sale on your investment property, unfortunately you will still be stuck with the tax burden. The government doesn’t have sympathy for homeowners losing a second or third home on the beach or in the mountains like they do for homeowners losing the only home they have.
What’s great about a short sale is sellers can get the burden and stress of having a home they can’t pay for off their back. The short sale lenders take care of all the fees in selling a home, including Realtor fees, closing and title fees. If owners have additional liens on their property like HOA liens (which are sometimes the most difficult to remove), utility or contractor liens, Realtors and title co’s will need to handle these issues with real attentiveness to make sure the property can convey clear title and the short sale lender will pay the balance of all these items off in full at closing. This isn’t to say the bank won’t ask for a seller contribution toward the cause, but usually all fees are covered by the short sale lender.
Short sales will affect your credit immediately with between a 200-300 point decline and can impact your credit score for two-three years. Compared to a foreclosure, short sales are easier to recover from with foreclosures affecting credit between seven and ten years. After a short sale, if you continue paying other bills on time you will be able to bounce back in no time and can even purchase a new home down the road.
So if you or someone you know is in a position of potentially losing a property now or in the near future, it might be time to consider doing a short sale in order to benefit from this limited time program. As an expert in short sale transactions, I can provide assistance to homeowners in any stage of foreclosure. Contact me today if you have any questions or concerns. www.annemariesellsorlando.com or at www.annemariesells.com