Mortgage Debt Forgiveness Act Extended Through 2013

This is really good news!  Congress has extended the Mortgage Debt Forgiveness Act as part of the fiscal cliff deal.  What does it mean to you?

Well, really, nothing unless you’re going to sell your home as a short sale this year. Or, perhaps if you have a neighbor that needs to do a short sale.  What the Act did was to prevent the homeowner from being taxed on the forgiven debt that was part of the short sale.  Prior to the Act going into force in 2007, if you were forgiven $20,000 worth of debt on the sale of your home, the IRS treated it as income and you had to pay taxes on that amount.  Tough to do when you could prove a hardship and couldn’t make your mortgage payment to begin with!

It was anticipated that without the extension of the Act there would be no incentive for consumers to go through the stressful and rigorous short sale process and it would likely result in more ‘walk aways’, i.e., strategic defaults.  Not good for the homeowner, not good for the neighborhood. It’s always better to have homes occupied rather than sitting vacant.

As an aside, did you know that ‘fiscal cliff’ was one of Lake Superior State University’s entries on its annual ‘Banished Words’ list this year?  It sits alongside other terms like “kick the can down the road,” “boneless wings,” and “bucket list.”  See the list here.

And while you’re reading the list, feel good that the Mortgage Debt Forgiveness Act was extended – even if ‘fiscal cliff’ has been banished.

Selling You Home In Today's Market - Free Seminar

Should you rent your home or sell it? Or work with your bank to modify your loan? What is your house worth?

How do you find a buyer for your home? Can you no longer afford to make your monthly mortgage payments? Do you owe more on your mortgage than your house is worth?

Have you received a notice of default on your home?

This seminar is free and open to the public. We'll discuss the issues above and answer any you have regarding the current local residential real estate market.

Feel free to invite your friends to this event.  Call  or email me  for reservations.
Hope to see you there!

Buyer Activity On The Rise?

It's not just me. Talking with agents from other firms and to agents within my company, there seems to be a real spike in buyer activity.

I am getting regular calls on my listings and frequent email inquiries from my various web sites and blogs. Most of the activity is coming from two groups - first time buyers who are generally in the $175,000 and below range, and move-up buyers looking higher. There are a lot of great values in the $225,000 to $300,000 range. Larger, newer homes with a lot of space and upgraded amenities seem to be the ticket.

This is great for the move-up buyers that have been able to save some money, retire debt, or both. They are in a wonderful position to get bargains right now.

A recent short sale in which I worked as a buyer agent gained the buyers $40,000 in equity. This is no joke. The sale price was $240,0000 and the appraisal came in at $280,000. A recent foreclosed home that I had listed sold for $210,000 and appraised at $240,000. Believe me, appraisers and banks are looking critically at comparable properties and have tightened up on the appraised values significantly, but these types of gains are still fairly common in my market areas.

Sellers, I still recommend that you don't put your home on the market unless you absolutely, positively have to sell. If you do market your home, accept that its value will be less than it was just two years ago. Unless it's priced properly you won't even get people to look at it to see how great it is.

Buyers, get pre-approved, Not just a pre-approval letter, but have your lender run the credit, put you through desktop underwriting and really see what (or if) you can afford to buy. If you're looking at foreclosures as a possibility, you may even have to get pre-approved by a representative of that particular bank, although they won't require you to use them for the actual transaction. They're simply trying to reduce the number of transactions that fail to close.

I regularly work with buyers and sellers, have a good listing inventory mix of traditional (homeowner or retail) and bank-owned properties. I'm experienced at short sales and have undergone loss mitigation training, too. If you're feeling the pinch and think you might be on the road to losing your home, call me for a short consultation. There may be other avenues you can take with your lender to keep you in your home.

Mortgage Forgiveness Debt Relief Act Signed by President Bush

On December 20, 2007, President George Bush signed the Mortgage Forgiveness Debt Relief Act of 2007. For homeowners in financial trouble, this is good news.

Under the system before this act was signed, homeowers that sold their homes for less than what was owed (a 'short sale'), or who had debt forgiven due to a foreclosure, deed in lieu or other loan modification arrangement, were taxed on that forgiven amount, often called 'phantom income'. Internal Revenue Service (IRS) guidelines considered that amount a gift, and therefore taxable income. Talk about kicking you when you're down!

The act is retroactive to January 1, 2007 and runs through December 31, 2009. It's capped at a $2 million figure for tax relief and is limited to situations where debt is forgiven because of a decrease in home value or financial hardship of the borrower. It also excludes second homes from tax relief, so it works only with your principal residence.

It also calls for the extension of mortgage insurance premium deductions on your tax return through 2010.

The bill is considered responsible and fair because it will be paid for by increasing penalties for S corporations and partnerships that fail to file taxes.