Short Sales Sprint

Short Sales Sprint

As might be expected, the number of short sale transactions completed has increased over the last few months as a law with favorable tax consequences for short sale sellers is set to expire on Dec. 31. Unless Congress extends the Mortgage Forgiveness Debt Relief Act, homeowners who agree to a short sale could see their income tax jump significantly because the portion of the unpaid loan balance not covered by the short sale proceeds could be considered taxable income in many cases. “The prospect of being taxed on potentially tens or hundreds of thousands of dollars in additional income may motivate more distressed homeowners to forgo a short sale and allow the home to be foreclosed,” said Daren Blomquist, vice president of Realty Trac. RealtyTrac is a foreclosure tracking company based in Irvine. According to RealtyTrac’s third quarter foreclosure and short sales report, short sales of properties not in default increased quarterly and yearly by 15% and 17%, respectively. Pre- foreclosure sales – properties in default or scheduled for auction – were also up in the third quarter and increased by 22% both quarterly and yearly. As for bank-owned (already foreclosed) properties, the number of transactions across the country increased 19% from the previous quarter, but was down by 20% from last year. RealtyTrac says that unlike the trend seen in recent years, sales of properties in pre-foreclosure outnumbered sales of bank-owned properties in the third quarter, which again is in line with the possible expiration of the Debt Relief Act.

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