January 1, 2014 is scheduled to be the end of the "Mortgage Foreclosure Debt Forgiveness Act" that Congress passed in 2007 but finally expires at the end of this month. This action figures to significantly reduce the number of "short sales" around the country, and that is GREAT news for thousands (if not millions) of potential home sellers.
Here is why. Not having this "Act" in place will mean that a property sold via a "Short Sale" (from which the bank approves a reduced amount to satisfy the loan amount due) will no longer relieve the individual home owner/seller of the tax responsibility for the remaining value of the house. Of course, no one wants to see property owners who have lost their home suffer any more of a financial hardship of thousands of dollars more.
For example, suppose a home with a mortgage of $150,000 is sold (after Jan. 1st) as a "Short Sale" for only $100,000, as approved by the bank holding the loan. Without the Mortgage Foreclosure Debt Forgiveness Act" in place, it will mean that the home owner would now be held responsible for taxes on the "remaining" $50,000. This could mean a tax bill of $10,000 to $15,000 for that "owner".
The positive in this, as I see it, is that this situation is likely to discourage the majority of short sale candidates from going this route. The fewer short sales there are, the better, since the biggest reason for the stall in the real estate market is the sales of distressed properties at unfair prices.
Not having short sales and foreclosures taking up a percentage of available listings in most cities will mean that "real" home sellers will be able to ask and receive realistic prices once again.
What kills me is that the National Association of Realtors President has actually spoken out against this Act ending. I suppose that is an "in the public eye" comment to appear not in support of higher tax bills for home sellers. But I don't get it.
The NAR is actually part of the housing problem, based on their members "accepting" short sale and foreclosure property sale prices as if they reflect on the value of area properties. These short sale and distressed property sales are really to satisfy a loan, and should not reflect upon home sale statistics. But they have for these past few years, and that has destroyed home sale prices.
With fewer and fewer short sales resulting, home prices will get back to reality sooner, and that is good for the majority of the people. Again, I don't like to see people get a hefty tax bill, but it should be them taking a financial hit ahead of millions of people losing money on their homes.
1 hour ago