Though short sales were almost unheard of 5 years ago, they
have become more and more common in recent years. There are several advantages
for both lenders and borrowers leading to an increase in short sales both
nationally and locally. More and more Watsonville
Forecasters are predicting that 2012 may see an even sharper
increase in these transactions due to the following factors:
- Foreclosure activity in 2012 is predicted to increase 25% over 2011 as banks work through their legal problems associated with the “robo-signing” scandal. An increasing number of homeowners, when faced with foreclosure, will choose a short sale instead.
- New laws in 2011 granted greater protections to Californians who complete short sales. It is now illegal for any mortgage holder to pursue a short sale seller for any shortfall in paying off the mortgage.
- Many
banks, including Chase, CitiBank, and Bank of America are offering cash
incentives for delinquent borrowers to do short sales.. These may range
from $3,000 to $35,000
- Perhaps
the biggest motivator for homeowners under financial hardship to complete
a short sale in 2012 is for tax reasons. The Mortgage Tax Relief Act, eliminating
tax on mortgage debt forgiveness, expires Dec. 31, 2012. Consider this example, if you owe
$500,000 on your mortgage, but proceeds from foreclosure or short sale
only net your lender $400,000 you may be liable for ordinary income tax on
the $100,000 difference. Especially
in the
831-724-2253
www.FreddieMac.com/singlefamily/avoid_foreclosure.html
Mike Young is a Realtor and advocate for the
underwater homeowner based in Capitola, CA
831-234-1545
