Although most of our previous posts show how the South Florida area is faring much better than many other real estate markets, there are some who are still suffering from the housing meltdown. Those South Florida residents who have a home that is “underwater” — worth less than is owed on it — a mortgage loan modification sometimes isn’t an option. But, for many, there is another option: a short sale.
So, what is a short sale and how can it benefit you? Well, if you are able to close a short sale by the end of the year, the process could provide you with quite a benefit. A short sale is the process whereby the homeowner sells their home for less than it is worth, and negotiates a settlement with the banks and lenders, sometimes allowing the remaining balance to be forgiven. For people who just continue to make a mortgage payment with almost no hope of catching up, a short sale can make sense.
And why is it important to close a short sale by the end of the year? It is because there is a federal tax law that expires at that time, but which currently allows a homeowner who completes a short sale and has the remaining debt forgiven to escape from the usual tax which would apply to the forgiven debt. And, according to some experts, there are more than 412,000 South Florida homeowners who are currently “underwater” on their mortgage. If those homeowners do not start the process of completing a short sale soon, they will miss out on the tax loophole — unless Congress renews it.
The good news is that more than 53,000 Palm Beach County and Broward County homeowners have taken advantage of this tax law since 2007 by completing a short sale. For homeowners facing unemployment, delinquent payments or even foreclosure, it may be beneficial to look into starting the short sale process on their homes and doing it fast.
Source: SunSentinel.com, “Deadline looms for short sales,” Paul Owers, Sept. 7, 2012