As I explained in a post I wrote back in November “Will They Extend the Mortgage Forgiveness Debt Relief Act?” There were thousands of distressed homeowners that weren’t sure if they would receive “short sale tax relief ” or if they would be forced to pay income tax on phantom income when they sold their home via short sale. For most people that are in this situation, this would have been financially devastating.
When the Mortgage Forgiveness Act of 2007 was put in place because of the nationwide real estate collapse, for three years it guaranteed people that they could short sale their homes and move on with their lives without having to worry about having to pay income tax on the difference between the full payoff and the short pay off. Then after 2010, they kept on extending it for one more year.
For some reason, however, in 2014 congress took its own sweet time and nobody was sure if it would be extended yet again. Many distressed homeowners chose to just let their homes be foreclosed on in fear of the possible income tax implications. Other underwater homeowners rolled the dice and did a short sale anyway and prayed that the government would eventually do the right thing.
The people that took that chance and did a short sale anyway, lucked out big time because in December congress finally decided to extend law and on December 19 the president signed off on it making it official.
Short Sales In 2015
Of course, the question for the next year will be…Will They Extend it for 2016? Again the answer will be the same as it was last year. We’ll just have to wait and see. Unfortunately, not knowing if it will be extended again is not only bad for underwater homeowners that desperately need a short sale but for the Orlando real estate market in general.
