Hello – thanks for stopping by my blog today. A few days ago Dannette Underwood, as licensed attorney on my team, wrote a summary on the new law that Congress just passed. Since this is breaking news – I want all my clients to know what it means if they should know of anyone that is faced with loosing their home:
Always here at The Marti Hampton Team, Remax One Realty, we strive to keep you, our Sellers, apprised of any pertinent news in the Real Estate Industry that may help you in this process of selling your home.
Recently, our fair Congress passed legislation that can, in fact, help many Sellers who have been attacked by the adjustable rate market of a few years ago or those – that because of unfortunate situations or circumstances beyond their control – have found themselves unable to remain current on mortgage payments.
This is the information we want to impart to you today . . . the passing of the Mortgage Forgiveness Debt Relief Act of 2007. In a nutshell this law can remarkably help those Sellers who are or may be faced with the possibility of a Short Sale on their property.
First of all, a SHORT SALE is one where there is not enough money in the Offer from a Buyer to pay off the Seller’s mortgage (or mortgages) in full, along with all of the other costs involved in the sale, and we then work with the Lender to negotiate a sale on the property anyway so that most of the mortgage gets paid. This often happens when a Seller has become delinquent in the mortgage payments, so there is a lot of additional interest and late fees that are attached to the payoff. Before this new law was passed, if a Short Sale was had on a piece of property, the Lender could then take the amount that it did not receive as part of the Short Sale and send a 1099 to the Seller, who in turn would then have to show this shortage as Income on their tax return! So, you wonder – what’s the point in even trying to do this, then, right?!
The new Mortgage Forgiveness Act amends that part of the Internal Revenue Code which allowed this to happen and says, nope – Lenders cannot treat this shortage in the full payoff as income to the Seller, if the house is their primary residence; so once the Short Sale is finalized the Seller has NO OTHER FINANCIAL RESPONSIBILTY to the Lender!
So, now, instead of feeling like a Seller may not have any alternative but to just file Bankruptcy or let the house go into Foreclosure, there is “a light at the end of the tunnel” here – the house can be sold, the Seller’s credit can be saved (or at least just blemished and not ruined), and there will not be additional income the Seller has to report on next year’s tax return!
Great news for Sellers who find themselves in this unfortunate situation!! So, if this does or could apply to you, please use this knowledge and this new law to your benefit. Or, if you happen to know someone who might find this information beneficial, please pass it along to them.
(As always, please consult a tax specialist when dealing with those IRS laws!)
Stop by next time for my “forecast” for the 2008 Triangle housing market. God Bless. Marti