Short selling your home usually has a big tax consequence. The dollar amount of debt that your bank forgives used to be taxed as income. The Bush Tax Relief of 2007 waives that tax until the end of next year. If you find yourself upside down, now is the time to sell with no tax consequences. If you wait until after the relief expires, you may have to own your home until it is paid off!
For example, you bought a home for $225,000 that is now worth only $150,000 (it could even be worse than that). If you pay on your home for the next 10 years your balance will have only gone down to $146,000. Assuming that your hom doesn’t lose more value, it will take over 10 years to even try and sell it. At that sales price it still wouldn’t cover Realtor expenses.
Your government has given you a tax break and it is imperative that you take advantage of it. If you have never missed payment on your home, that is even better. Banks are accepting short sales regardless of payment history. Not only that, some lenders do not consider short selling your previous property while not missing a payment a default. That means you might even qualify to buy a new home next door for $150,000 without the 10 year wait.
If you are worried about a deficiency judgment, that can also be avoided too – you just have to know how.
Calling all short sellers: Sell now before it is too late!
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Source by Adam Lieberman