Homeowners who have been served with a default notice have a few options to prevent foreclosure. A short sale is one very desirable option but the deadline for taking advantage of tax break for these sales is drawing near.
The Mortgage Forgiveness Debt Act, which was enacted in 2007, expires at the end of the year. Under the act, a troubled homeowner who agrees to a short sale doesn’t have to pay taxes on the “income.”
A short sale is when a mortgage lender agrees to sell a home for less than it is worth and agrees to write off the remaining balance owned by the homeowner. When a bank writes off the mortgage balance, it is then considered income and therefore taxable.
For a troubled homeowner this “phantom” income could end up putting them in an unbearable tax bracket. But a troubled homeowner can take advantage of this tax break by allowing a foreclosure attorney to negotiate for a short sale now, because they take months to finalize, so their homes will sell by the end of the year.
After receiving a default notice a person may feel paralyzed and unaware of their options they have to stop foreclosure. A foreclosure lawyer will be able to determine which route the homeowner should take whether it is a short sale, mortgage modification or a court challenge.
The best way to avert being kicked out of your home is to react quickly by retaining an accomplished foreclosure attorney to work on your case.