Monthly Archives: December 2012
We are quickly closing out the fourth quarter of the year with only 14 days left. With that being said, we are seeing short sales on the rise as this year comes to a close.
According to a recent article published on CNN Money, the number for short sales that have occurred this year have drastically jumped in comparison to last year’s numbers. CNN article states, “During the three months ended Sept. 30, short sales in which homeowners had fallen behind on mortgage payments soared 22% over last year, according to a report released Thursday by online marketing company RealtyTrac. By comparison, short sales by people current on their payments went up 17%.”
Why is there such a drastic increase in the amount of short sales that are closing?
Well the main reason is due to a tax break for homeowners that could possibly be expiring come the end of this year. The tax break that has the potential of expiring, currently helps homeowners who have unpaid mortgage debt not get taxed on the money. This tax break is called the Mortgage Debt Forgiveness Act. However, this act expires Dec 31.
What will happen if the act is not extended?
Homeowners that have unpaid mortgage debt will have to begin getting taxed on the debt. According to Blomquist, the average amount of forgiven debt in a short sale is approximately $95,000.
Because this can really affect homeowners who are experiencing a short sale, many real estate agents are pushing to close as many short sales as possible by the end of the year, to help their clients avoid this tax. As a result, we will most likely see a large jump in the amount of short sales that will occur in this fourth quarter.
However, those that will not be affected are California, Arizona and 10 other states. According to CNN Money, “ One group left out of the benefits of the tax break are homeowners in California, Arizona and 10 other states in which the IRS does not tax forgiven debt because of those states’ laws.”