If you are upside down and owe more than your home is worth, you have probably considered a short sale.  In a short sale, the lender allows you to sell your home for less than what is owed and your debt is cancelled.  Prior to 2007 however the amount not re-paid to the lender was taxable income, which created a huge hardship for homeowners seeking relief from high mortgages.

In 2007 congress enacted the Mortgage Debt Relief Act which generally allows taxpayers to exclude income from the discharge of debt on their principal residence. This includes debt reduced through loan modification and short sale, as well as mortgage debt forgiven in connection with a foreclosure.  This act has allowed thousands of underwater homeowners to sell their homes without fear of tax consequences.

The clock is ticking however, as the Mortgage Debt Relief Act was a piece of special legislation designed as a short-term fix to help alleviate some of the problems created by the collapse of the housing market.  It will expire on December 31 of this year, and it is unclear whether or not it will be extended.

So, if you are considering a short sale, the time to act is NOW if you hope to avoid being taxed on the unpaid balance owed.  A short sale takes anywhere from 60 days to several months, so with 5 months left in 2012 the time is right to still get your short sale completed before the end of the year.

For a free, no-obligation consultation, please give us a call.  Our success rate listing and negotiating short sales is over 95% and we are happy to supply references.  We are not a huge, impersonal office of paper-pushers and we deal with each client on a personal basis, making sure we address your individual needs and situation.  Please call Steele Group Realty Broker/Owner Marti Kilby at 619-846-9249.