Christian Debt Recovery

Mortgage Debt Forgiveness Act Expiration Date

September 24th, 2007 |

Author: Gavin

Should I Wait for a Foreclosure or Short Sale my Property?

A foreclosure or short sale happens when a homeowner cannot make their mortgage payments any longer. The latter is an option for the homeowner that helps them to avoid the worst fallout from a foreclosure. Foreclosures are famous for destroying credit and, more importantly, for traumatizing the homeowners. They often come with a feeling of failure—which is usually not at all justified—and with a lot of hassles due to having to relocate when your credit has been destroyed. This can even affect your odds of renting an apartment.

A foreclosure or short sale both have some very significant implications. With a foreclosure, you can count on the following.

You’ll lose your home
It will not be voluntary or on your schedule
Your credit will suffer immensely
There may be other debts incurred as a result of the foreclosure

With a short sale, the situation is still serious, but not quite so severe:

You’ll sell your home for less than the remaining mortgage amount
You are in control of some aspects of the process
Your credit will not suffer as much
The deficiency can be negotiated or forgiven

The Mortgage Forgiveness Debt Relief Act of 2007 allows homeowners to avoid being taxed on the amount of money that is forgiven as a result of the short sale. Formerly, this was counted as income. This act has been extended until 2012, so whatever deficiency amounts are forgiven by the lender will not be taxed as income until the act expires, assuming that it is not extended further beyond that date. The options before you, then, are foreclosure or short sale, and you’ll have to decide what you want to do.

If you pursue the short sale, you can use a real estate attorney, agent or a short sale company to help you work out the paperwork. The bank will need to know for sure that you actually cannot make payments. They don’t want to forgive debt for people who simply want to shirk their responsibilities. There are definitively situations, however, where you’ll find that you have few other choices. This isn’t something to feel guilty about. Mortgages are business deals and not all business deals work out. The bank took on a risk when they lent the money, and some risks don’t pan out for lender or borrower.

Making the decision between foreclosure and short sale is not easy. The foreclosure is the option that really isn’t an option. When it happens, you won’t be consulted, you won’t be given time to vacate the property and you’ll basically be tossed out onto the street. There are plenty of pictures, videos and stories of this happening to people, especially after the latest economic bubble, the real estate bubble, imploded due to the amount of shady lending, ridiculous appraisals and endless pitches to people who never should have qualified for a mortgage.

About the Author

I’m Sean Crosier, the owner of Golden State Real Esate in Simi Valley, CA. In these tough economic times, many homeowners are facing foreclosure. On behalf of the homeowner, I’ll negotiate with their lender to get them to agree to a short sale. My primary goal is to not only get the lender to agree to a short sale, but to also to get them to release any right they have to pursue the debt after foreclosure.

In dealing with a short sale, it’s critical to have a strategic plan in place for negotiations. I have several contingency plans in place to ensure that we reach the best possible outcome for you.

None of the information provided is intended as legal and/or tax advice. Always consult qualified and appropriate professionals prior to making any decisions.

If you have any questions, please feel free to contact me through my website or by phone at (805) 520-0525. Comments and feedback through this site are appreciated and always welcomed.

Sean Crosier
Broker/Owner
Golden State Real Estate