If you owe more for your house than what it is worth you only have a few home selling options, one of which is losing your home to foreclosure. To avoid a foreclosure you can sell your house as a short sale. A short sale is selling your home at a price that is less than what you owe the bank. Thus the funds at the closing table are short of your payoff.
Usually only experienced real estate investors and a very small number of real estate agents know how to complete a successful short sale. The key is to find a buyer for your home or a real estate investor. The buyer or real estate investor will negotiate with the bank to accept less than what you owe them. Some banks will accept a short sale because they do not have to foreclosure on the property, so saving them money.
Before the new Debt Relief Act of 2007 was signed into law home owners who accepted a short sale were taxed on the difference of what they owed the bank and what the bank accepted.
For example if you sold your house for $ 100,000 and you owed the bank $ 150,000. The bank would be accepting $ 50,000 less than what you owned them. In return the bank sends the IRS a 1099 form for the $ 50,000. The next year the IRS would expect you to pay regular income tax on the $ 50,000. This would amount to a tax of $ 14,000 for the typical American family.
The new Debt Relief Act of 2007, signed by George W Bush will allow people to sell their house as a short sale and not be taxed on the short amount. This is an intimate benefit to home owners who are over leveraged on their home. You now can accept a short sale and not be taxed on the short amount
If you are 100 percent funded on your home and can not afford your mortgage payment I suggest contacting a local real estate investor. Local real estate investors will buy your house as a short sale, handle all of the paperwork, and negotiate the sale with your lender. With success your will have your house sold and have to pay no tax on the sale.
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Source by Shaun Greer