Impact 5: Debt forgiveness act scheduled to end

Save thousands by starting short sale process now

GREENACRES, Fla. - To dodge foreclosure, many South Floridians hit by the housing crisis have chosen to go with a short sale.

In just a few months, that process could cost thousand of dollars more than it does right now, which is why some real estate experts are pushing people to start the short sale process now, if they're thinking about it.

Carey Hunt of Greenacres is finishing the short sale process because the past year hasn't been easy for her.

"I went through cancer treatment and my brother passed away from cancer," she said. "My sister-in-law died after a lengthy illness and Danny's (her partner) dad passed away."

The hardest part for Danny and Carey is that Carey's family is located in Canada.

"We need to be home," she said. "We can't afford to keep the house down here. We'd have to maintain it and keep a house down here."

She's worried about being forced into foreclosure on their 3-bedroom Greenacres duplex.

"A few houses down, you would drive down and all their furniture was outside," Hunt said. "There were foreclosure signs all over this area.  That was frightening because you were like, 'Holy cow that could be us.'"

To avoid that, Hunt is short selling her home for $87,000, which is much less than the $210,000 the couple paid for the home. 

In a short sale, her bank will take over whatever is left on the mortgage.

"Regardless of if you're in a lower tax rate, $100,000 is going to be tens of thousands of dollars in taxes probably," Real Estate attorney Adam Seligman said.

Since 2007, people like Hunt haven't had to pay those taxes because of the Mortgage Debt Relief Act, but that act is scheduled to expire at the end of this year.

"We absolutely didn't have the money for (the taxes)," Hunt said. "What would I have done? That's the thing about taxes they don't go away and they just keep adding on fees and penalties."

Seligman suggests starting the short sale process right away because it takes some time.  Hunt's short sale took just a little more than two months.

"The problem with waiting is if the tax law isn't changed you're going to run out of time to do a deal this year and close because a short sale could take an average three to five months," Seligman said.

The process could take longer though.

"It's not nearly as scary as you think it is.  The scary part is not doing anything at all," Hunt added.

President Obama's administration and other Realtors are trying to get the act extended, but that would be decided by Congress.

Not everyone qualifies for debt forgiveness so for more information click the link below.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Print this article Back to Top

Comments