One very significant issue facing the real estate market this year is the expiration at the end of the year of both the Mortgage Forgiveness Debt Relief Act of 2007 and the end of the Home Affordable Foreclosure Alternatives (HAFA) program.
Under the Mortgage Forgiveness Debt Relief Act of 2007, many homeowners are relieved of the responsibility for paying income tax on mortgage debt forgiven through short sale, foreclosure, or loan modification.
The HAFA program allows certain homeowners to sell their homes as “short sales” and be relieved of any future responsibility for the deficiency (difference between mortgage balance and amount the home sells for).
If you are considering what to do with your property and its worth less than the debt on the property, there are compelling reasons to do a short sale versus allowing the property to go to foreclosure, and there are compelling reasons to do a short sale in 2012. Since short sales can take a long time, if you want to do a short sale to benefit from the Mortgage Forgiveness Act and/or the HAFA program, you need to list your property early in 2012.
With short sales and foreclosures, you need to be concerned about:
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future liability for the deficiency (what your lender gets versus what’s owed on the mortgage)
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the income tax implications for debt that is forgiven
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the impact on your credit score.
This can be complicated to understand and will depend on various factors - it is imperative that you consult with qualified attorneys and accountants.
Please contact me if you would like to understand what your property is worth in today’s market, if you are interested in discussing “short selling” your home, or if you have any questions about the real estate market.
Pam Dempsey
773-548-3300 office
312-560-8498 cell
pamdempsey@msn.com
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