Short Sales are great options for many people. With that said, you do need to be well informed and know the possible consequences…this is a great article about short sales.
Check it out and let me know what you think:
The Down Side of Short Sales – Be Prepared
What you don’t know might hurt you…
I have seen such a Paradigm shift in the last few months with listing inventory in Phoenix and Scottsdale that was once flooded with Foreclosures now being overcome with Short Sales.
Pressure on banks to agree to Short Sales from the Feds (courtesy of Mr Obama) has created some interesting effects.
1st, it’s created a recent slow down of homes being sold at auction because of postponements of foreclosure by banks which are now more willing to deal with short sales. I had one realtor friend of mine heavily involved in purchasing flip properties of at least 2 per month crying about not having anything to purchase at auction because of the postponements now for the last 5 weeks in Phoenix.
On another note I’ve also seen that people selling homes short of the debt are discovering a little problem with their taxes.
The banks that foreclosed are delivering 1099′s as promised and so in comes the tax debt they didn’t expect.
If the home was a primary residence among some other measuring criteria then you may not have to worry about owing income tax on the deficiency created by the short sale of your property (you can thank George W for that) BUT if you had an investment property or a HELOC or second mortgage for example then that 1099 delivered to you can result in you owing the IRS a tex debt.
The other side of the coin is this could happen if the home is foreclosed on as well because you are still creating a deficiency.
Either way, you may have an IRS tax debt.
So what I’m telling you here is… you sellers out there need to Do Your Homework!
Remember that Realtors are not Tax Attorneys, Accountants or Bookkeepers working on your behalf.
We’re sales professionals doing a job that you employed us to do… sell your home.
What I see some homeowners doing is assuming that since the home was sold as a Short Sale that the forgiveness of the deficiency provided by the bank ends the burden of having that debt. “Not all the time” is my answer.
So what’s the lesson here. Be diligent and work on every angle with a wide variety of resources outside the Realtors scope of expertise so you might avoid having the shock of discovering you owe money to the IRS or at least be prepared with that result.
AND, if you aren’t using an accountant to examine your taxes cause you think “Turbo Tax” knows all the ever changing tax laws and those coming, you need to step back and take a look at the bigger picture. If you aren’t using a tax professional my question is, in this day and age, why in the heck aren’t you?
So before you rush in to short selling your home, do some reading, ask some questions and get some advice from those other than a Realtor because that tax debt isn’t theirs…. it’s your.
All The Best,
Stew Keene – Home Smart Realty
North Phoenix & Scottsdale
GRI, ABR, ePro, MRE, CSSN, CNE, AHWD
www.stewkeene.com
Wilmington NC Real Estate & Homes – Michelle Roberts , Your Realtor – Michelle loves working with clients that have high expectations and works diligently to exceed those expectations in Wilmington, NC and surrounding areas including Ogden, Porters Neck, Wrightsville Beach, Carolina Beach, Castle Hayne, Leland, Burgaw and Hampstead. (910) 431-5686
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