Mortgage Debt Forgiveness Act – No Cause to Delay Short Sale

Published By: Matt Gregory

Update: Thankfully, at the end of 2015 the Mortgage Debt Forgiveness Act was extended through the end of 2017. This post was originally published in 2013 and since then the act was extended again at the end of 2015. as a result we again republished the post.

Although, many struggling homeowners were relieved the Mortgage Debt Forgiveness Act was extended, it’s no cause to delay a short sale if trying to avoid foreclosure. There’s certainly no guarantee the act will be extended again, and a short sale transaction can take a very LONG TIME.

Future Extensions of the Mortgage Debt Forgiveness Act are Uncertain

Here at the Gregory Real Estate Group, we close short sale transactions continually. Sometimes a short sale transaction can take years and sometimes they can take months. Generally, they take from four to six months, but it can easily be longer if the buyer get’s tired of waiting around and decides to jump ship! This is not uncommon unless the buyers has made a solid commitment to buying the home.

Think about it. Say you wait 4 months and finally the buyer walks. Then, you’re back at square one. You find a new buyer, go through the process again and the next thing you know you lost another four months.

Don’t Delay Short Sale

This federal tax debt forgiveness extension is certainly a blessing, but we don’t suggest homeowners delay short selling their homes as a result.

Setting the Mortgage Debt Forgiveness Act aside for a moment, when facing the possibility of foreclosure, the sooner a decision is made to short sale, the better chance of avoiding foreclosure.

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What Happens if Mortgage Debt Forgiveness Act is Discontinued

The Mortgage Debt Forgiveness Act has been around since about 2007 and it relieves homeowners from paying federal taxes on the amount of the forgiven debt. Once this act is discontinued, homeowners could be responsible for paying taxes on the difference between what their home sells for and what they owe.

Here’s an example. If a homeowner owes $300,000 on their mortgage but the home short sales for $250,000, even if their lender agrees to forgive the remaining $50,000, the government may not. It’s possible the homeowner would have to pay taxes on the $50,000. If you are struggling with your mortgage and considering a short sale transaction, we suggest obtaining a real estate agent, consult with other professionals and move forward, without delay

Your CPDE Realtor can Help You Avoid Foreclosure

If you are considering short selling your home to avoid foreclosure we really should talk. Since we have successfully closed many short sale transactions in the past, it’s likely we may have some other options or solutions you haven’t thought of. Matt and his team are a short sale experts and Matt is a Certified Distressed Property Expert. We have extensive experience with short sale transactions and we have a team of professional bank negotiators at our disposal.

Together, we have helped many homeowners to successfully short sale their homes and are happy to answer any questions you might have.

Comments are welcome! Please share your thoughts on this post, Mortgage Debt Forgiveness Act – No Cause to Delay Short Sale.

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