Monday, December 24, 2007

Just another good reason to pursue short sale opportunities

On December 20th Congress passed and GW signed the "Mortgage Forgiveness Debt Relief Act" much to the liking of short sellers and would-be buyers alike. This now prohibits the IRS from demanding income tax payments from homeowners who sell their property for less than the amount owed i.e. a short sale. Prior to this legislation, which goes into effect immediately, sellers would be hit with a tax bill based on the amount forgiven by their lender. The lender was required to file a Form 1099 with the IRS to alert it of the home seller's forgiven debt, which was treated as income, which seems strange as it was never actually received by the home seller. Talk about no mercy.

This long-awaited change is a positive for both sellers and buyers/investors as it removes a large hurdle to consider for struggling homeowners who need to sell, and investors who are potentially wasting time with people who might not end up selling due to the tax implications.

A rare win-win.

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