There’s been a lot of talk in Washington about budget balancing and government spending cuts following the fiscal cliff deal that lawmakers passed in January. Consumers might not realize there were several positive benefits concerning real estate—the extension of tax deductions for mortgage insurance premiums, home mortgage interest and certain energy efficiency improvements, chief among them—that were wrapped up in the deal.
One major victory: the extension of the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire last year. Normally, debt that is forgiven or cancelled by a lender must be included as taxable income on a borrower’s tax return. But the Mortgage Forgiveness Debt Relief Act allows a borrower to exclude from income certain cancelled debt on the principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
If you have clients who are in need of a short sale or are considering one, the time to act is now. It’s unlikely that Congress will extend the Debt Relief Act again, so those who don’t complete a short sale by Dec. 31 (when the relief measure expires) might get taxed on the forgiven debt from a short sale in 2014 and beyond.
With market inventory so low right now, and a more streamlined process for short sales in place at major banks and lenders around the country, short sale listings are moving through the market at a brisk pace. Agents who are knowledgeable about short sales will be successful at getting these transactions closed if they’re proactively educating clients about this option.
Thankfully, there’s less of a stigma associated with a short sale, and that gives homeowners more confidence to reach out for help. If you have distressed property training, such as the Certified Distressed Property Expert or Short Sale and Foreclosure Resource designations, tell your past clients and market these qualifications on your website and social media pages.
Educate your buyers about the short sale process and explain that purchasing a short sale property isn’t as cumbersome as it used to be. The key to a successful transaction is upfront communication between the listing and buyers’ agents to ensure that all of the transaction’s key players are on top of paperwork and following both federal and lender guidelines for response times and approvals of buyer offers.
Low inventory is making it hard for buyers to find the perfect home in some cities. A well-maintained short sale property that’s priced to sell and has a cooperative lender on board might be a great option.
The victory that homeowners scored with the extension of the Debt Relief Act is huge for their financial health and to the market’s ongoing recovery. Short sales offer struggling homeowners a viable alternative to foreclosure with a little less pain, but homeowners must act now. Help them get through it and they’ll be your clients for life.
Margaret Kelly (CRB) is chief executive officer of RE/MAX, LLC.
For more information, visit www.remax.com.
