As the article below indicates the volume of short sales has continued to rise and has now surpassed foreclosures. This is happening because the lenders net more money in successful short sales than foreclosures. So obviously we know why the lenders want to push short sales.
However, there are financial benefits to the homeowners as well when they do short sales, compared to foreclosures. If you are having difficulty paying your mortgage on your primary residence, there are a few ways by which financial compensation is available to induce homeowners to choose short sales.
The HAFA program provides three direct incentives.
* $8,500 will be made available to pay off any second mortgage holders (this was only $6,000 until March 9, 2012).
* $3,000 is made available to the homeowner directly as relocation assistance
* If lenders agree to permit a short sale, they must release the borrower from all personal liability.
Then there is the tax incentive. If the short sale is completed by calendar year 2012, then the IRS will “allow taxpayers to exclude income from the discharge of debt on their principal residence.” Simply put, your taxes on the forgiven portion of the mortgage will be waived by December 31, 2012 according to the Mortgage Debt Relief Forgiveness Act. In California, the Franchise Tax Board will follow the IRS’s lead. Depending on the amount of the loan, and how much negative equity is involved, this could be a huge amount of money.
I have been crowing for months that the time now is the perfect occasion to do short sales. The benefits to both the lenders and borrowers are clearly obvious and all involved parties certainly seem to have taken advantage in order for short sales to jump ahead of foreclosures in volume. Homeowners are now planning their futures rather than simply permitting the lenders to make decisions for them. I have always told my clients to take control of their own financial destiny by making the appropriate decisions; after all, no one will take care of your own interests like yourself.
Short Sales Bypass Foreclosures, Hinting at Hope for Housing Market