Short sale debt relief Act—Extended

by Joe Salcedo on 12:13 am

Short Sale Debt Relief Extended

Good news for homeowners looking to short sale their house and didn’t quite make it last year, because it has been extended through 2013 as part of tax bill H.R. 8. Basically the debt relief states that if you owe 150,000 and you short sale for 100,000 you won’t have to pay the tax on the 50,000.

The act was signed the first week of the year as one of the more fine print details to help avert the “fiscal cliff”.  Short sales are an important mechanism to help clear negative equity, and for sure a better choice than a foreclosure

“For distressed homeowners, the extension of the Mortgage Debt Relief Act is amazing news,” said Dawn Wooldridge, CDPE of Keller Williams American Premier Realty. “Before this act, homeowners would negotiate a loan modification or avoid foreclosure through a short sale only to find they owed an equally unmanageable tax debt afterwards.”

 To break it down, homeowners were upside down on their mortgage only to find out after they worked out a short sale deal that they were upside down on their tax debt as well. This extension gives them the opportunity to clear there negative equity, afford the tax, and not hurt their credit in such a devastating manner by avoiding a foreclosure.

This is the section of the bill that extends the act:

“TITLE II–INDIVIDUAL TAX EXTENDERS

Sec. 202. Extension of exclusion from gross income of discharge of qualified principal residence indebtedness.”

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– Philip Duane Johncock


“I was laid off from the state in November of 2007 due to major budget cuts. We were no longer able to make our house payments as the job market was just beginning to get worse and worse. My agent in San Jose found Joe Salcedo in Reno for me and told me he has a lot of experience in short sales. He priced our home at a very realistic price in relation to the market values at the time. Joe was very professional and before we knew it we had an offer on our home. In September of 2008 our home closed and the bank forgave the difference. A short sale comes off of your credit in a much, much shorter time than a bank foreclosure. We will be forever grateful for the assistance of Joe Salcedo”

– James and Marsha McGinnis (feel free to call for a reference, Joe has my number)

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