Orlando Real Estate

Get Your Head Out of the Sand

March 9th, 2012 11:26 AM by David W. Welch

You are under water on your mortgage, or maybe having trouble making your mortgage payments. What do you do? It appears a lot of people are doing nothing. Things are getting better here in Orlando with respect to our local real estate market, but I believe there are still thousands of homes that are in trouble. Only a portion of the homes that have had foreclosure filings over the last few years have shown up in our marketplace. I imagine some people were able to catch their payments back up, some have been pursuing loan modifications, and others may have hired lawyers to help with a foreclosure defense to delay the inevitable. I have a much stronger suspicion that many people, maybe most, are just ignoring their situation and hoping for some miracle.

There are options to foreclosure, and while it may be embarassing or frustrating to jump through the bank's hoops, doing something has got to be better than doing nothing. I tell eveyone who asks me about loan modifications, short sales, deed in lieu or foreclosures to speak with an attorney. They are best able to help you understand each option and how it may effect you. In general terms though, I recommend a HARP refinance or loan modification if you wish to stay in your home. These options help you keep your credit intact while making your current home more affordable. If you just cannot afford to stay in your existing home, and have other living options available to you, a short sale may allow you to get out from under your upside down property. As a last resort, if you feel you just do not have other options available to you, a foreclosure defense lawyer may be able to keep you in your home a bit longer while you work on other living arrangements.

If you are considering a short sale on your personal residence, I strongly suggest you act sooner rather than later. Mortgage debt forgiveness is treated as regular income under the IRS tax code. That means if you successfully short sale your house, you could be taxed on the amount of your mortgage debt that your bank had to forgive to complete the sale. This really added insult to injury for people already hurt by the housing market. The Mortgage Forgiveness Debt Relief Act of 2007 eliminated these tax implications for short sales of primary residences, but only through 2012 - this year!

David Welch Real Estate Optimist, Orlando Real EstateAny Home-Any Phone

Posted in:General
Posted by David W. Welch on March 9th, 2012 11:26 AM

David: I'd like to share my experience w. short sale. I live in Switzerland and I sold a rental property short. My mortgae was insured and the ins. company insisted that I put $5k for closing what I did. I received 1099-C with "Was borrower personally liable for repayment of the debt = NO". I file taxes electronically. When I entered this information the "forgiven debt" has disappeared from my income. (when I tried to enter "YES" instead of "NO" it appeares as income). IRS has accepted my electronic return. May be "there will be troubles ahead" but I think, if the mortgage is insured you don't have to pay tax on forgiven debt. Do you have any experience with the insured mortgages and short sale?
Posted by Irina on March 10th, 2012 10:34 AM


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