Nancy Cason appointed to Twelfth Circuit Judicial Nominating Commission
The Mortgage Debt Forgiveness Relief Act, which alleviates the adverse tax consequences of debt forgiveness in connection with certain primary residence short sales, is set to expire on December 31, 2013. Since short sales take approximately six months to complete, there’s still time to take advantage of this Act before the end of the year, and the timing is never better than right now, according to Real Estate Attorney Nancy Cason.
One of the things my family enjoys most about summertime is that baseball season is back and in full swing! If I had to compare the rise, fall and recovery of the Sarasota real estate market to a baseball game, I would say we are now solidly in the seventh inning stretch.
True, we have come so far from the days of rapidly plunging values, widespread economic hardship and record mortgage defaults — but we aren’t in the clear just yet …
As in any good baseball game, the last two innings are critical to a solid win and need to be well played.
Currently, there are over 16,000 foreclosure cases pending in our court system, with new foreclosures still being filed at the rate of hundreds per month. The court cases pending represent a “shadow inventory” of properties that have mortgages in default that have not been resolved. The fact cannot be ignored in the recovery equation, as a true, stabilized recovery simply cannot occur until we have worked through the shadow inventory lurking in the court system.
In reality, despite the fact that sales are on the rise, median prices are up, and we are experiencing record low interest rates, there are still many homeowners trapped in hopelessly underwater homes with unaffordable mortgages that still need relief. The short sale is, by far, the best solution to this problem. The good news is that the previously chaotic short sale process has become streamlined over the past few years. The National Mortgage Settlement reached last year with the nation’s five largest mortgage servicers, Bank of America, Wells Fargo, Chase, GMAC and Citimortgage, provided financial incentives for servicers to forgive deficiency balances in connection with short sales and other servicers are following suit.
Now more than ever, I am seeing that servicers are willing to approve short sales with debt forgiveness of most, if not all, of the deficiency balance. This is true even for high net worth individuals, and individuals with assets. Short sale approval with debt forgiveness and no adverse tax consequences is what I would consider the legal equivalent of a “home run.”
Since forgiveness of debt is generally regarded as income for IRS tax purposes, the Mortgage Debt Forgiveness Relief Act was implemented in 2007 to alleviate the adverse tax consequences of debt forgiveness in connection with certain primary residence short sales. However, the Act is currently set to expire on December 31, 2013.
A properly planned and executed short sale typically takes about six months from listing to closing. An experienced realtor and solid legal and tax advice is critical to short sale success.
If you are an underwater homeowner considering a short sale, especially of a primary residence, now is the time to act. There is still time for you to hit your home run before the end of the year!