Debt Relief Act extended through 2013, benefits homeowners considering short sales

Last week was about having a plan and being prepared for change, because change will happen. It’s becoming clear, after an eleventh hour settlement of sorts by Congress, that the fiscal cliff will be a multi-step process. This will have a drag on growth well into 2013.

The good news is that for homeowners considering a short sale, Congress saw fit to extend the Mortgage Forgiveness Debt Relief Act for another year. This measure will continue to exempt from taxation mortgage debt that is forgiven when a homeowner and their mortgage lender negotiate a short sale, loan modification (including any principal reduction), or foreclosure. This act clearly benefits qualified homeowners who may have otherwise owed taxes on that forgiven debt.

Keep in mind to consult with your tax advisor to evaluate your financial situation as a whole and confirm.

In addition, 98 percent of us will be paying about the same in taxes this year. Only those few who make $400,000+/yr. will be paying more. However, payroll taxes will increase and those funds will be reinstated to help fund Social Security. Per Tax Policy Center, expect the average household tax bill to increase by about $700 this year.

Most likely the focus will turn toward spending, though many in both camps have expressed regret for falling short of a sweeping plan to combine tax changes and spending cuts to reduce our federal deficit.

This means significant spending cuts and reforms to our many entitlement programs are still on the table.

A good percentage of us in recent years have been forced to live within our means, while others have continued to budget and save. Time will tell if Congress takes the same approach.

Lastly, for the few that are still waiting for that wave of shadow inventory to materialize, don’t. It’s an urban myth, maybe a controlled release at best. Due to this lack on inventory locally, I’d plan on some appreciation this year.

Mortgage rates continue to be at historic lows and it appears they will remain as is well into 2013.

If you have questions regarding available inventory to purchase or the current bank service short sale incentives to sellers, contact Mike Mason, Broker/Owner of MASON Real Estate DRE: 01483044, Board of Director of Southwest Riverside County Association of Realtors® (SRCAR), Short Sale & Foreclosure Resource certified by National Association of Realtors® (NAR) at [email protected] or call (951) 296-8887.

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