Deadline Looms for Short Sales
Unless Congress grants an extension of a law created in 2007, many South Floridians will remain in a position where they owe more on their homes than they are worth, and will no longer be able to avoid paying taxes on forgiven debt. The ticking clock has many Palm Beach home owners who are facing foreclosure anxious and worried about what they will do should the law expire.
The law is for primary residences only, and should the law expire on December 31, 2012 as it is written, some home sellers will see their tax bills skyrocket. For example, if a lender forgave $100,000 in debt during a short sale, the home owner could owe more than $25,000 in taxes. For Palm Beach home owners who are already under water in their house, the assumption that they have this kind of money laying around is preposterous.
One of the issues that lenders often take several weeks or months to approve short sales, so home owners who don’t begin the process in the very near future could miss the deadline. It’s a matter of timing and the message is clear: act now if you’re hoping to have any of your debt forgiven. The complicating factor is that short sales can drag on for a long time, which is a turnoff to many buyers. It puts sellers in a tough position because just when they think they have it all figured out, their short sale solution can evaporate rather quickly. Add to that the very real possibility of an astronomical tax bill and it’s enough to make you never want to purchase a home again.
While the country may be facing its only financial crisis, so too are millions of Americans who have seen their home values plummet in recent years. Over 412,000 South Florida home owners are "underwater," owing more than their homes are worth. It could be 10 years or more before values return to the levels where home owners can break even.
Incidentally, short sales are a good option for home owners who can withstand the lag time and their tumultuous nature. They’re a great way to escape a crushing mortgage, and when you factor in the tax relief on forgiven debt that is still an option (if only for a short while), home owners should make their move now, instead of hoping the law will be extended.
More than 53,000 homeowners in Palm Beach County and Broward County have completed short sales since 2007. To apply for a short sale, a home owner must show proof of a financial hardship like a job loss or unexpected medical expense. Additionally, new short sale guidelines imposed by the government will take effect in November and will permit a short sale if the home owner is relocated more than 50 miles away for a new job or job transfer.
Interested in short selling your home or condo ? Please contact our local team of short sale experts at Palm Beach Premier Real Estate - we can help!
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