I would like to comment on your article entitled "Selling the Market Short" in which the writer attempted to warn the public of the result of selling their home via the Short Sale option. While I appreciate the media attempting to keep the public well informed, in this case it was your article that fell "short."
While your article is correct in stating that home owners can be, and most times are, sent a 1099 form in the amount of the "forgiven amount", it is also important to provide information about the Foreclosure Tax Relief Act of 2007 (H.R., 3507) that was passed in December, 2007, and was designed to allow forgiveness of the Federal income taxes that are due as a result of selling your house "short."
While I am in no way offering legal advice, and recommend that anyone who is considering a short sale consult with an attorney and tax accountant, I can say that the Act provides Federal tax relief for those who, during tax years 2007, 2008 and 2009, choose to short sale their primary residence and who receive a 1099 form for the difference in what they owe and what the bank accepted as payment. As of this date, there is no similar relief for investment properties or second homes, and is not applicable on a State tax level.
If people are considering selling or purchasing a home through the Short Sale process, I would highly recommend they hire a real estate agent who is experienced in these difficult transactions. Also, I think it is important to note that avoiding the sheriff's sale can help in reducing the long term effects that foreclosure can have with regard to future credit and credit scores. If anyone in foreclosure would like more information regarding short sales, I would recommend sitting down with your attorney, accountant, and with a real estate professional who specializes in such transactions.
For more information on the Foreclosure Relief Act of 2007, you can visit www.govtrack.us
Marcia Hilber, Broker
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