Death of a Short Sale

Some things last forever. The Mortgage Debt Relief Act of 2007 does not. In fact, it is set to expire at the end of 2012, and this will affect the ability for thousands of Americans to short sale their home. As one the most sought after alternatives to foreclosure for distressed home owners, short sales have become the option of choice for many facing the possibility of losing their home.

Short sales are generally better for your credit than a foreclosure and allows you to buy a home sooner than if you were to foreclose. The good news is that there is still time to utilize the benefits of the Act and entertain the idea of a short sale if you are in financial trouble. The bad news is that you are steadfastly running out of time. With the short sale process typically taking between 4 to 6 months, it is imperative that you act sooner rather than later if you are considering a short sale option. Once the Mortgage Debt Relief Act of 2007 expires next year, it will be much harder to short sale your home.

What is the Mortgage Debt Relief Act of 2007?
According to the IRS website (, “The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.”

In closing, if you are facing the possibility of losing your home and would like an option besides foreclosure, a short sale could be a great opportunity for you and your family. As we draw closer to the expiration date for the Mortgage Debt Relief Act of 2007, it is imperative that you act quickly. Paige Slyman is an expert in metro Atlanta real estate, foreclosure and short sales.

If you or anyone you know if facing foreclosure…please forward this or have them contact me.

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