With the Mortgage Debt Relief Act most likely not being extended in 2014, most markets will show a huge decline in short sales. The act states that lenders cannot file a deficiency judgment or 1099 if the property is owner occupant. If the act expires most people will not be doing a short sale in fear of the lien holder going after a deficiency judgment or 1099.
Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in September
“Look at the first two columns in the table for Short Sales Share. Short sales are down sharply from a year ago, and will probably really decline in early 2014. It appears that the Mortgage Debt Relief Act of 2007 will not be extended again next year. Usually cancelled debt is considered income, but a provision of the 2007 Debt Relief Act allowed borrowers “to exclude certain cancelled debt on [a] principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.” (excerpt from IRS). This relief expires on Dec 31, 2013. As I've written before, plan to complete all short sales by the end of this year!
Total “Distressed” Share. In most areas the share of distressed sales is down year-over-year (Hampton Roads is an exception). Also there has been a decline in foreclosure sales in all of these cities except Springfield, Ill.”
Fred Sed talks about the Mortgage Debt Relief Act of 2007 expiring on January 1, 2014. What this could mean to homeowners.
From what I've seen in the Tampa Bay market most (75%) of people doing short sales can afford the payment but elect to do a short sale to avoid paying their upside down mortgage or home equity line of credit (HELOC). If lien holders start to go after home owners we are going to see a huge decline in short sales and fewer homes on the market.
If you are thinking about doing a short sale I would strongly advice consulting a CPA and short sale attorney. For questions about real estate in Tampa Bay visit Tampa2Enjoy.com.