Short Sales and Debt Forgiveness… San Diego Buyers and Sellers: Knowing the implications.

Sellers should definitely do their homework regarding the law and tax implications associated with the debt that is forgiving on a short sale (and foreclosures).  I also believe that my San Diego condo buyers should also know the guidelines when bidding on short sales because it will help them understand the process and put them in the shoes of the seller.   Because I believe agents should be able to explain the basics knowledgeably to their buyer and seller clients, I’ve done a good amount of homework on the topic.  But any seller should consult a tax professional directly to obtain specific advice on your situation.  Having said that, the absolute best resource to bring yourself up to speed (for sellers in the earlier stages of considering a sale) I always suggest going directly to the source… the IRS! 

Go to the IRS website…. irs.com.  In the upper right hand search field type “Debt Relief Act.”  The first search result in the list should be a link to the IRS webpage that fully explains the Mortgage Debt Relief Act of 2007.  This is the peice of legislature that put in place the new law regarding allowing debt relief to homeowners on their principle residence without that foregiveness being taxable.  There are great Q & As too.  Check it out and then talk to your tax person….  be an informed consumer no matter what side of the transaction you land on.  Always good to have more information that not.  Always a good thing.

Oh… and be sure to make note that this law is only in effect on debt forgiven until 2012! Only 2 years left folks.

Tara Steinke

Residential Sales & Appraisals

619-384-6014