De Novo Law Firm has helped numerous Riverside and San Bernardino property owners short sale their home. If you are seriously underwater on your home and delinquent on payments, a short sale attorney can help you determine the legal and financial consequences of a short sale. A short sale is a sale of your property where your lender agrees to accept less than is owed on the loan. Why would a lender agree to such a proposal? A short sale allows a lender to avoid the cost and delays involved in a foreclosure while still getting maximum value for the property.
While a short sale is a great option for many homeowners, there are some potential pitfalls. In particular, homeowners need to be aware that a short sale may result in significant tax liability as the IRS may count the forgiven loan as “debt forgiveness income.” Thus, if you sell your home for $100,000 less than you owed on the loan, the IRS may expect you to pay taxes on the $100,000 that was forgiven under the short sale.
The Mortgage Debt Relief Act of 2007 was signed in to law to specifically address the potential tax liability for those who short sale or who have received principal reduction on their primary residence. While the law provides significant protection from taxes for homeowners who received debt forgiveness, the law is not permanent. The Mortgage Debt Relief Act is scheduled to expire at the end of 2012. Unless Congress chooses to extend the tax forgiveness, homeowners must be aware of this deadline.
If you are close to foreclosure or have decided to let your Riverside property go, now is the time to act to begin the short sale. Our office of Riverside short sale attorney can help you consider your legal options. If short sale is not the right option for you, we can advise you on loan modifications with principal reductions, Chapter 13 bankruptcy, or foreclosure and lender litigation as a method to permanently keep you in your home.