Homeowner, You're Doing A Short Sale And You Don't Even Know It!
The clock is ticking for home sellers, and many of you are going to be doing a short sale even though "that thought" is the furthest thing from your mind right now.
You're hoping you can sell your home for enough money to cover the debt, or you're hoping that "one special buyer" will come along and save the day.
You continue to sit idly by as the housing market moves further from your asking price, serving in the role of set-up house for the properly priced home sellers down the street.
I see it all the time, and I hope that this article can be a wake-up call for people who plan on moving in the next few years.
Home values are dropping in Tallahassee, and we know that the imbalance between real estate supply and demand will force values lower for the foreseeable future.
Additionally, the recent news of of rising foreclosures and the fact that nearly 40% of all sales are from distressed properties means that only sellers with significant equity will be able to sell their homes without bringing money to closing (or doing a short sale).
This means that most (more than half) of all sellers over the next year or two will be upside down on their mortgage. And the smartest move for many of them will be doing a short sale. But did you know there is an even smarter move?
Upside Down Homeowners Need To Be Doing A Short Sale Now
Smart homeowners who plan to move in the next few years are doing a short sale today. Why? Because of the tax consequences, that's why.
According to the IRS, "the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
That means for most home sellers, the IRS will not make you pay taxes on the debt forgiveness if you close on your short sale before December 31, 2012. So do you think you have plenty of time for doing a short sale? Think again!
Time Is Running Out To Be Doing A Short Sale
Despite claims by the banks that they are speeding up the process for doing a short sale, we are seeing bank response rates just as slow as any time in the past few years. They are swamped and the amount of files they are processing is growing.
If you were to list your home today, and get a contract tomorrow (end of June 2012), you would hope to get a response from the lender sometime in August. But September would not be out of the question. Nor would October.
And the buyer will need time to close on the home once the lender has accepted the contract (if the lender accepts the contract).
Add all the twists and turns that could occur, you have (at best) 30 to 45 days of buffer before you are in the panic mode.
And if you do not have the world's best short sale agent, you probably are already past the deadline for doing a short sale.
Final Advice On Doing A Short Sale
Whether you think you need to be doing a short sale or not, download my FREE 86 Page SHORT SALE RESOURCE by clicking on the book above. Read the chapters that are relevant to your situation, and quickly gain some understanding of the benefits of doing a short sale now versus waiting to do one in two or three years (your equity situation will not improve by then).
If you think you can hold on to your home for five or more years, then perhaps you might not need to consider doing a short sale. But what's the harm in getting better informed? Read the resource, and then let me know if you have any questions about doing a short sale in order to save you a ton of money.
*Joe Manausa Real Estate is a brokerage company headquartered in Tallahassee, Florida. Its unique business model provides specialists to both home sellers and home buyers, and the results speak for themselves. JMRE has significantly more 5-star reviews on google than any other local competitor. Joe Manausa Real Estate is a leader in internet marketing and utilizes search engine optimization, email marketing, social media and data analytics to get their clients’ home sold faster and for more money than any other Tallahassee brokerage firm. For more information, visit www.manausa.com or call us at (850) 366-8917.
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