Think Short Sale NOT Foreclosure!

As everyone knows, the real estate and mortgage industry has been in trouble over the past few years. Thousands of families find themselves in financial trouble due to drastic rate increases in adjustable rate or interest only mortgages coupled with home prices that have been steadily declining. Most people failed to consider the possibility of the huge increases upon entering the agreements. Only now, they find themselves with mortgage payments that they cannot afford to pay. Often, foreclosure is seen as the only option available to these struggling families. However, there is one important aspect of a foreclosure that people forget – the resulting tax liability.

Foreclosure is always the last resort for someone struggling to make mortgage payments. People usually think it will be the end of their problems. However, the IRS considers debt canceled through foreclosure to be part of a taxpayer’s income. The IRS feels that it is entitled to the appropriate income taxes on that money. It also has access to every taxpayer’s financial information so it can ensure the appropriate taxes are paid. And as most of the country already knows, the IRS is very aggressive in collecting taxes that they know are outstanding and feel they deserve.

A short sale is a FAR MORE viable and FAR LESS destructive solution.

What is a short sale? A short sale is a method in which a bank accepts less than what is currently due on the mortgage as payment in full. With the market in the situation that it is in banks are becoming more and more receptive to this process. It can create a WIN/WIN for both the bank and the homeowner. Yes, there are tax implications with the IRS on the "forgiven or excused" money. This phantom money will get reported by a 1099 to the IRS for you to claim on your taxes in which you would want to seek a qualified and reputable tax professional to assist you with. However, this is far less money to have to claim than the entire mortgage balance!!

Foreclosure is the absolute LAST result that you should be willing to accept. I understand that it is very hard to face this, I know that it seems easier to hide and not answer the phone or open the letters. BUT the more time that goes by the fewer options you will have. There is a very limited window of opportunity to have a short sale. If you find yourself in this situation contact a Realtor to have them assist you!! Let them try to remove this burden off of your back.

I service the Taunton, Berkley, Freetown, Lakeville, Middleboro areas.

Please contact me if you need assistance.

www.berkleymass.com