Short Sale? You Better Know This Before you List Your Home!

While this really has nothing to do with getting a home loan, chances are you or someone you know is thinking of short selling their home.  Or perhaps you are shopping for a home  right now and this could affect you as well.

Let's first talk about the person who is or is thinking of short selling their home.  The 2007 tax forgiveness act is about to expire.  So what does that mean to you if you are currently short selling or thinking of short selling your home?  Well it could mean huge tax liabilities.  I want to start off by saying I am not a CPA nor am I giving tax advice here.  What I am saying is there could be a huge consequence if this tax break expires.  An example would be this.  Let's say someone sells their home for $100,000 less than what they owe.  Theie income is in the 30% tax bracket.  This could mean you would now have a $30,000 tax liability that you will have to pay.  Again, I am not a CPA and I always advise my clients to speak with a CPA before they move forward with listing their home as a short sale.  As you can see in this example, this could be financially devastating.  Therefore, please, contact your CPA and if you don't have one, you need one now.   Even if you have sold your home this month, will it close on time to avoid the tax penalty?  You only have a few weeks left before the end of the year and the expiration of this tax forgiveness.  Protect yourself now!

As a buyer?  If this tax forgiveness doesn't get extended, than that means the inventory is going to be even less than it is today.  While it may be good for someone that wants to sell their home because it will create even more multiple offers, it does mean that finding that home and getting your offer accepted just became harder.  With the fiscal cliff looming and Congress Christmas break looming, there is a good possibility nothing will happen until next year.  But when next year?  January? February? March?   

As a Seller or potential Seller with a short sale I would say talk to your CPA now!  Also write to your Representative and tell them to get it approved now!  Click here to find  your Representative.

Please feel free to email or call me anytime.  But if you have a home listed right now that's a short sale, time is of the essence! Get the professional tax advice before it's too late!