Tax Free Short Sales Extended to 1/1/14

When Congress passed the American Taxpayer Relief Act of 2012, also known to many as the ‘Fiscal Cliff’ bill, an important one year extension to the Mortgage Forgiveness Debt Relief Act was implemented. This Act provided tax relief for homeowners who were granted mortgage debt forgiveness because of a loan modification, short sale or foreclosure on their primary residence.

Many homeowners and real estate brokers breathed a sigh of relief knowing the Act was extended through January 1, 2014. Had the Act not been extended, thousands upon thousands of struggling homeowners currently in a short sale solution would have been further crippled by a large tax bill.  We had almost a dozen short sale clients personally that would have been affected since many of their homes didn't close until 2013.

Typically, when a lender forgives a debt, the amount forgiven is considered taxable income.  However, the Mortgage Forgiveness Debt Relief Act was  implemented specifically to protect homeowners from cancelled mortgage debt if the forgiven debt was on their qualified principal residence. Only cancelled debt that was used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies under the Mortgage Forgiveness Debt Relief Act.  Second homes and investment properties are not included in this act.

Without the protection of the Mortgage Debt Relief Act, there was no motivation for homeowners to consider an alternative workout solution. This could have resulted in many homeowners just choosing to walk away from their homes, which would force banks to foreclose. The housing crisis is just beginning to recover and we see a great 2013 ahead. If the Mortgage Forgiveness Debt Relief Act had not been extended, it surely would have been disastrous to the housing recovery.

Contact Rich Ayers at The Ayers Team if you need help with your Oswego Short Sale.  We have a 26 page Short Sale Information Package we can send you that explains the short sale process, implications, and includes the required forms needed by your lender.

Rich Ayers is a licensed Real Estate Managing Broker in Illinois.  Ayers Realty Group has EXPERIENCED Brokers who specialize in Residential and Investment real estate in Naperville, Oswego, Plainfield and the surrounding suburbs of Chicago. We also own and manage multiple investment properties and help real estate investors find, buy, fix, rent and sell their investments. We are experienced Short Sale experts and hold the CDPE (Certified Distressed Property Expert and SFR (Short Sale and Foreclosure Resource) Designations. Visit our website at www.AyersTeam.com or follow us on Facebook.