There are consequences of doing a short sale whether it be in the Santa Maria real estate market or anywhere your house is located this is for the reason that you owe more in respect to your mortgage home loan than what your home happens to be worth at this time, this is when you are upside down. Do not get me wrong there are some benefits to a short sale as well; we are only going to touch a little bit with respect to the dark side. Keep this quick also short as well as to the point.
With the condition that you read my last blog then you read referring to the benefits of carrying out a short sale assuming that you did not at all you might need to visit that blog considering there are some benefits as to why you would want to do a short sale vs. letting your house foreclose with the condition that you should not at all qualify for a foreclosure. The majority of Santa Maria homes for sale also quite a bit of likely in Calif. are either a short sale or a foreclosure in addition to a good percentage of homeowners can be contemplating what course of action to do whether to simply walk away or work in connection with doing a short sale.
You have to allow into consideration which you owe $400,000.00 on a house which is plainly worth $200,000.00. What happens to the difference???
First we will talk in relation to the IRS, the Feds as well as then we choose to talk in regard to the effect towards a state level referring to by what means they look at that $200,000.00 dollar variation. In any case what occurs provided that you do a short sale will the bank eat the difference, The response depends referring to where you live. You will need to look into the laws of your state, for example if a bank agrees to do a short sale in the state of California whether it be a first or a second the bank may not be able to come after you for the deficiency amount.
Most reading this are probably thinking that’s cool sign me up in addition to let’s do a short sale. The only dilemma is which the IRS considers any canceled debt as ordinary income, even when dealing coupled with credit cards in relation to working on settlements. So but now the picture is not at all so rosy especially provided that you have never made $200,000.00 in your life in addition to at this time looking at a tax bill of $200,000.00.If you do a short sale you will be receiving a 1099C for 200k assuming that you do a foreclosure you will receive a 1099A, these will need to be filed with your tax return. So at this time what do you do? You should have a couple of alternatives as well as do please keep in mind try to go to somebody that is incredibly experienced with taxes this is not at all something you want to just give permission anyone do for you.
So here are some Exceptions to the rule on paying taxes.. Listen up
1) The IRS will not collect taxes in relation with the deficiency amount provided that the homeowner filed Bankruptcy and included the deficiency amount.
2) The homeowner filed insolvency at the time of cancellation of debt, that means that you owed more than what you have in assets you do not need to file BK this could be done at the time when filing your tax return.
3) With the condition that this was a rental property in addition to you may offset debt by other business liabilities and expenses basically back to being insolvent.
Assuming that you simply allow the place to go to foreclosure no worries this is straight from the IRS themselves
Update Dec. 11, 2008 – The Mortgage Forgiveness 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 seeing that mortgage debt forgiven in connection not to mention a foreclosure, qualify for this relief. bear in mind DECEMBER 31, 2012 SO with the condition that YOU ARE THINKING OF carrying out A SHORT SALE DO IT SOON!!
This provision applies toward debt forgiven within calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exception ($1 million if married filing separately).
In closing the benefits generally do out weigh the consequences in doing short sale vs. a foreclosure in the Santa Maria real estate market. The Largest benefit would be when do you want to become a homeowner again. This was just a brief summary of the tax consequences involved also you will need to seek the counsel of somebody that may advice you with filing for your taxes. The Santa Maria real estate market will still have a few years of dealing with foreclosures and short sales as the primary source of houses with respect to the market.