Raffi Tal has been successfully executing short sales since the early 90's and currently oversees all files as the company’s EVP. Under Tal’s leadership, I Short Sale, Inc. has become one of the nation’s leading firms in short sale volume. As an authority in the field of loss mitigation, Tal has been a guest speaker on the issue in various conferences, seminars and for a variety of media outlets.
Having a foreclosure on one’s credit report will impact a credit score much more than will a short sale. If one is successful in completing a short sale, in many cases, he or she may qualify for a mortgage much sooner than with a foreclosure. Not surprisingly, short sales have thrived under the Mortgage Forgiveness Debt Relief Act, which allows homeowners who have received principal reductions on their mortgages as the result of loan modifications, short sales or foreclosures to avoid income taxation on the amounts forgiven. Under the debt relief law for qualified home owners, taxation can be avoided on forgiven mortgage amounts up to $2 million (married filing jointly) and $1 million for single filers. To be eligible, the debt must be canceled by a lender in connection with a mortgage restructuring, short sale, deed-in-lieu of foreclosure or foreclosure.
There have been 1.6 million short sales reported by the National Association of Realtors since late 2008, accounting for between 10 percent and 14 percent of home sales activity each month during that time. The Mortgage Forgiveness Debt Relief Act is not going to be extended beyond 2012. So if you’re a home owner contemplating a short sale, should you act now or hold off?
Given the huge public and private resources now being devoted to helping financially distressed home owners — including the recently announced $25 billion national mortgage settlement with five major banks — you might assume that a key federal tax law benefit underpinning these efforts would be a shoo-in for renewal.
Election-year politics, however, could doom renewal of the debt relief tax legislation and put large numbers of loan modification participants deeply in the hole.
The extension of the Mortgage Debt Forgiveness Act beyond December 31, 2012, therefore, is hardly a slam dunk. That being said, home owners contemplating whether to do a short sale now or wait until next year might be best served to take the “I’d rather be safe than sorry” stance and do their short sale before year end.
