In the Summer of 2012, the buzz was all about the rush to get your short sale sold and closed prior to the end of the year. Why? To avoid paying taxes on the debt being forgiven by your bank (http://goo.gl/Axu5Z). Why was it such a critical issue? The forgiveness of debt exemption that applied to many short sale sellers expired on 12/31/2012! So there was a big push to get your property listed, sold and have the short sale negotiated, approved and closed before the expiration of this very important tax issue.
You won’t believe the number of panicked Sellers that called to list their home and attempt a short sale in September or October of last year trying to “beat the deadline,” only to be told by their attorneys or Realtors that there would be a very good chance they would not make the deadline for tax relief simply because of the time needed to properly negotiate a typical short sale.
Well the U.S. Congress extended the deadline in January of this year. Guess what? It expires again on 12/31/2013! Here’s the strange part: I don’t hear any buzz about the deadline again….and I have no idea why! Let’s face it, Congress could have extended this for 3-5 years if they had wanted to. They didn’t. There is no guarantee they will extend it again. I do know that if you are still under water in your Las Vegas home (despite the 20% rise in prices this past year), you really ought to think about this and act on it soon!
Let’s look at the cost of waiting. If you had done a short sale in 2010, you could have now be eligible to purchase a home this year. Typically the wait is 3 years from the completion of your short sale. You would be in a position to take advantage of:
a) low interest rates
b) 3.5% minimum down payments (they may not be around for a lot longer)
c) a good value on a home (prices are still rising)
d) Not having a landlord
Here’s a few good reasons why you should be considering a short sale on your Las Vegas home if you are in fact under water and experiencing a financial hardship:
1) Time on the market till sold is quick! Inventory is low in Las Vegas and even short sales get sold quickly. That was not always the case 3-4 years ago… and who knows if it will be that way 6 months from now?
2) Since inventory is low, you can get a good price for your short sale. The higher the price the less the forgiven debt. Again, an increase in our future inventory will change this.
3) If successful, your debt is forgiven…no more “under water” concerns
4) No huge tax burden if you qualify for the exemption (believe me it is HUGE)!
5) The typical time to negotiate a short sale once an offer is accepted is 90 days. List your home in August and you should just about make it. This can be complicated in a big way if you have more than one lender that needs to be negotiated with.
6) Last year we found that the closer we got to December, there was a high probability of experiencing delays with lender short sale processing due to the sheer volume of people attempting to meet the deadline. Delays were the buzz word of the day!
Bottom line, a short sale is still one of the best ways to get out from under a mountain of mortgage debt AND avoid paying taxes on the debt forgiven. The Caveat: you better act soon!