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Mortgage Forgiveness Debt Relief Act May Effect Short Sales

February 7, 2014 by Lance Mohr

I wrote a blog last year talking about how short sales would slow down because Congress did not extend the Mortgage Forgiveness Debt Relief Act (MFDRA). Based on the real estate statistics for Tampa in January the number of short sales have decreased. I believe some of it has the do with the law not being extended and home owners have a little equity in their homes because of the price increases of 2013. Either way, it's good news that the short sale market is depleting.

Expired short sale tax relief may impact home sales
“According to Fitch Ratings, the recently expired tax relief provided by the Mortgage Forgiveness Debt Relief Act (MFDRA) of 2007 may lead to modestly negative pressure on liquidation timelines as potential short sellers hold off listing their home. The longer it takes for Congress to renew the tax forgiveness – assuming it does – the more home sales will be impacted.

The tax relief expired Jan. 1, 2014, creating larger tax burdens for underwater borrowers who receive some form of mortgage debt forgiveness. Without tax forgiveness, the IRS considers any capital forgiven by a lender in a short sale or foreclosure to be income to the homeowner, and it taxes it accordingly. The MFDRA provided tax relief by allowing certain borrowers to exclude such income on their tax returns. The act applied only to debt associated with a primary residence, and no more than $2 million of debt could be excluded per year.”

If you have any questions about the real estate market in Tampa Bay, please give me a call. I pull market statistics every month and have a great pause on the real estate market in Florida. I have been doing short sales since 1999 and am an expert in that field. Click here to visit my short sale webpage.

1031 Exchange Can Save Real Estate Investors Thousands of Dollars

November 14, 2013 by Lance Mohr

If you are a real estate investor or even thinking about investing in real estate you need to understand what a 1031 exchange is. This is a great benefit for small and large investors that can give them a huge tax advantage and enable them to continue to invest in real estate. Over the years I have done multiple 1031 exchanges and have saved thousands of dollars of taxes. Of course, the only think better than deferring your taxes, is not having to paying taxes.

Below is a great article that Realtors and investors should read.

Don’t Let Clients Miss a Big 1031 Exchange Opportunity
“Before the property investment deal is sealed, ask your clients one important question: Do you know if you’ll owe taxes on the sale of your property, even if you’re taking a loss on it?

That conversation might be key to helping them unlock big tax savings by avoiding a common misconception: no profit means no taxes, investment specialists Rochelle Stone and John Mangham said at a session called “Investors Make a Comeback: 1031 Exchanges Return” last Friday at the 2013 REALTORS® Conference & Expo.

Once clients realize they could be facing a hefty tax bill, even when they’re selling at a loss, they could benefit from options that 1031 exchanges provide them, said Stone, president of Starker Services Inc., a firm that assists with these types of transactions. “Don’t let your clients leave their equity behind,” he said.”

Here's a video that explains what a 1031 exchange is and how they work. This is just a brief overview.

Years ago I showed a home to an investor that just sold one of his investment properties that he made $70,000 on. When I asked him if he did a 1031 exchange he said, No – what’s that. After I told him how a 1031 exchange worked he was furious that his Realtor and account didn’t tell him about this before he sold this home.

A knowledgeable Realtor should always be able to give you basic information on real estate mortgages and 1031 exchanges. If you have any questions please call me, Lance Mohr or visit our website.

Short Sales Coming To An End On January 1, 2014

October 18, 2013 by Lance Mohr

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.

Changes Likely for Mortgage Deduction

November 23, 2012 by Lance Mohr

Changes Likely for Mortgage Deduction

Realtors attending the conference and expo hosted by the National Association of Realtors (NAR) shortly after the 2012 General Election received distressing news about mortgage deduction and its future. This tax benefit is arguably one of the best five reasons for purchasing a home. It provides a significant discount to those who itemize deductions on their federal tax return.

Like many others across the world, political commentator Charlie Cook (Cook Political Report) has been following the nation's advance towards the looming fiscal cliff. Joined by Major Garrett, the National Journal corresponded for the White House, the two reviewed the implications of the election results. Once again, the Senate and House are split with a four-year record on non-cooperation with each other or the executive branch.

Using the 400 point stock market loss the day after the election to demonstrate Wall Street's lack of faith in the economic direction of the country, Garrett stressed that the deficit situation must be resolved quickly. Tax cuts allowed at present, including the mortgage deduction, total hundreds of billions of dollars. Failure to extend the tax relief for millions of American businesses and families will adversely affect the nation's Gross Domestic Product (GDP).

The negative impact to a country still working its way back from recession is obvious. Both President Obama and the legislature are expected to address the issues soon. It is possible the current deductions will be extended for a short time while a resolution is pounded out and approved. The mortgage interest tax deduction (MID) has the opportunity to be adjusted with a percentage or dollar cap. Whether a person owns waterfront property in Tampa or a condo in another part of the country, a change is on the way.

Expect a deal before the end of the year to avoid sequestration and tax reform issues to be addressed in 2013. The return of recession will be on the shoulders of Congress. It is in the best interests of many to retain the best parts of MID, although it is doubtful it will survive without changes.

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Mortgage Forgiveness Debt Relief Act May Effect Short Sales

1031 Exchange Can Save Real Estate Investors Thousands of Dollars

Short Sales Coming To An End On January 1, 2014

Changes Likely for Mortgage Deduction

Changes Likely for Mortgage Deduction

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