President Bush signed the Mortgage Forgiveness Act into law last week.
Prior to this act, banks and lenders, if negotiating a short sale, were allowed to tax homeowners on the amount of debt negotiated and send them a form 1099. Ultimately, what this meant to the homeowner is that the forgiven debt was treated as income. Here’s an example:
Fred and Mary Smith had a home with a loan balance of $300,000. Let’s supposed that someone purchased it, after negotiating a successful short sale, for for $225,000. The lender, in the past, could have sent a form 1099 to the Smiths, and the $75,000 of debt that “magically” disappeared would have been treated as taxable income.
With this new law in effect, that $75,000 will no longer be treated as income. At least until the end of 2009.
So what does this mean for you, the homeowner?
Well, if I were facing foreclosure, and struggling under a lot of debt, I would seriously consider getting out from underneath it.
That means that I would try and sell my property, using a short sale, because there would be NO taxable impact on me if I sold it via a short sale.
Remember that while many realtors might want to help you list your property as a short sale, finding an investor who is actually going to BUY your home (and not just list it), is your best bet.
If you’re in need of finding an investor to buy your home via a short sale, please visit www.SaveMeFromForeclosure.com today.
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