Will I Be Taxed On My Short Sale?

One of the number one questions I hear is what happens after the short sale? At The Dallas Home Team we make sure that your lender cancels the debt or that you are aware if it will not be canceled so you can make an informed decision. Here is an example: You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is considered as taxable income to you. You will receive a 10-99 for the forgiven debt amount however, it may not be taxable income.

Confused? In 2007 George Bush approved “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation”. What this means to you, the home seller, is that until 2012 there are certain instances where you will be able to fill out IRS Form 982 and file it within the same year that the debt was forgiven by the lender and the IRS will also forgive you the taxes you would have normally had to pay. Some of the reasons that you may not have to pay taxes on a forgiven debt include:

* Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.

* Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.


* Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.

* Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.

* Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.

(this information was taken directly from www.irs.gov )

So, in plain English if you short sale your home and it is your primary residence, the cancelled debt that you are 10-99’d for should be tax free once you file your Form 982. To read the act in its entirety visit http://www.irs.gov/pub/irs-pdf/p4681.pdf .

If you would like to comment on this blog please feel free or for more information about short sales please contact me at Tanyashomes@sbcglobal.net or at 469-452-7071.

Put your car keys beside your bed at night

If you hear a noise outside your home or someone trying to get in your house, just press the panic button for your car. The alarm will be set off, and the horn will continue to sound until either you turn it off, or the car battery dies. This tip came from a neighborhood watch coordinator.

Next time you come home for the night and you start to put your keys away, think of this: It's a security alarm system that you probably already have and requires no installation. Test it. It will go off from most everywhere inside your house and will keep honking until your battery runs down or until you reset it with the button on the key fob chain. It works if you park in your driveway or garage. If your car alarm goes off when someone is trying to break into your house, odds are the burglar/rapist won't stick around. After a few seconds all the neighbors will be looking out their windows to see who is out there and sure enough the criminal won't want that. And remember to carry your keys while walking to your car in a parking lot. The alarm can work the same way there. This is something that should really be shared with everyone. Maybe it could save a life or prevent a sexual abuse crime.

This would also be useful for any emergency, such as a heart attack, where you can't reach a phone, or with elderly folks in case they fall outside, or around the house, and need medical attention.

To Extend Or Not To Extend...That Is The Question!

The U.S. Senate’s chief Democrat, Majority Leader Harry Reid (Nevada), said Wednesday that his party has reached a consensus to extend the first-time homebuyer tax credit, which is set to expire November 30.

Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) has voiced the same sentiment to the media today, as well.

But the party support isn’t one-sided. Reuters reported that the chamber’s foremost Republican, Sen. Mitch McConnell (Kentucky), acknowledged that most senators support the measure, quoted by the news agency as saying he shares Reid’s view.

Reid summed it up on the Senate floor when he said, “There has been general agreement by a significant number of senators, Democrats and Republicans, to get this done.”

As DSNews.com reported Tuesday, the proposal gaining the most favor among Senators was an amendment offered up by Reid and Senate Finance Committee Chairman Max
Baucus (D-Montana), which would extend the tax incentive until the end of 2010, but reduce the credit amount with each quarter.

Take two: The tax break measure has gotten yet another makeover. The latest version reduces the credit to 10 percent of the sale price, with a cap of $7,290 – as opposed to the $8,000 maximum currently in place. The benefit could be applied to home sales signed – not closed – by April 30, 2010, allowing 60 days beyond that date for closing.

It would also be opened up to buyers who have lived in their current residence for at least five years, so-called step-up buyers. The income limits for first-time homebuyers would stay the same – $75,000 for individuals, $150,000 for couples – but increase for step-up buyers to $125,000 for individuals and $250,000 for couples.
Andrew Parmentier, a managing partner at Height Analytics, a research firm in Washington, told Bloomberg News that the demand for new homes and condominiums may more than double with step-up buyers as part of the equation. “You just opened up a whole new pool of people who can buy into those empty homes and empty condos that were built out,” Parmentier said – a move that would aid the existing-home market as well, as overall inventory levels are reduced.

A Senate vote on the credit extension was expected to come last night, but reportedly got entangled in legislative procedural issues. The tax credit amendment did not get attached to an insurance benefit bill, which did pass Tuesday night, as intended. Despite the red-tape roadblock, senators say a decision will be made sometime this week.

Don't Let A Little Bit Of Rain Stop You!

With all of the rain we have been having I thought it important to talk about showings in the rain. Very few sellers will stop showings from happening just because it is raining outside. As a matter of fact a seller needs to sell their home as badly in the rain as they do in the sunshine. It may be an optimal time for a buyer to steal a house that has just entered the market because other buyers want to wait for a more comfortable day to go out house hunting.

Here is some advice for a buyer who is committed enough to house hunt in the rain. Be prepared!
* Sellers may ask you to slip off your shoes at the front door to avoid tracking so be sure to wear shoes that you can slip on and off easily.
* Wear shoes you don’t mind getting wet or muddy…especially if you are looking at acreage.
* Bring a flashlight. Some houses, especially foreclosures or short sales, may not have electricity and with a day darkened by rain it will be hard to see no matter what time it is.
* Trade in umbrellas for raincoats. An umbrella is something you have to open and close, open and close so a raincoat with a hood is a better choice to speed up the time spent getting in and out of vehicles…or spent in the rain.
* Have your agent with The Dallas Home Team give sellers plenty of notice for the showing. A seller cannot go walk the dog on a rainy day during your showing so they will need to make other arrangements while you are viewing their home.

So, bring your goulashes and good house hunting!

Do You Want $8,000 and a Home?

This credit should really be called "it's been a while" home buyer credit. You qualify for this money if you have not owned a principal residence at any time during the 3 years prior to your purchase date and meet some other guidelines

Frequently asked questions:

You only have until November 10th to have your loan submitted into underwriting if you want the $8,000 tax credit! I really don't want you to be one of the people that funds your loan on December 1st and you missed out on $8,000! Our team is working double time to help people find their dream homes quickly. Our lenders are ready to submit you into underwriting quickly so that you will not miss out! **If you are getting a USDA loan, your deadline is even sooner!

That means you quickly need to do the following if you want this money:

* qualify for a loan
* find the perfect home
* put in your offer
* negotiate your offer
* make sure you have enough money for down payment, closing costs, etc.
* do your home inspection
* have your home appraised
* submit to underwriting
* get loan documents
* sign documents at the title company
* loan needs to fund prior to November 30th

If all the items above do not happen prior to November 30th, you will not get the tax credit. Realtors, lenders and people just like you are trying to get this deadline extended! There have been 5 bills introduced to Congress to extend the first time home buyer credit.

* S.1230: Home Buyer Tax Credit Act of 2009 was introduced on June 10, 2009
* H.R.2801: Home Ownership Moves The Economy (HOME) Act of 2009 was introduced on June 10,2009
* H.R.2606: Home Buying Credit Expansion Act was introduced on May 21, 2009
* H.R.2619: To amend the Internal Revenue Code of 1986 to temporarily expand the credit for the 1st time was introduced on May 21, 2009
* H.R.2655 - To amend the Internal Revenue Code of 1986 to expand and extend the first time homebuyer credit was introduced June 2, 2009

For now, we can either wait and see if the intense lobbying of groups such as the National Association of Realtors and National Association of Home Builders can sway the lawmakers to believe this is a high priority or we can contact our local senator or representatives' offices ourselves!

Senate Look-up
Representative Look-up

I wouldn't wait around hoping that the extension goes through. Contact our team now and let's get started finding you a home! Call us at 469-452-7071 for any questions or to get starting on your home search!

Halloween Tips

Here are some tips from the The Dallas Home Team to keep you, your guests, and all your little goblins safe as you create your own “Monster Ball” or get ready for a night of trick-or-treating:

1. Keep candles and jack-o-lanterns away from curtains, decorations, and other combustibles.

2. Never leave candles unattended.

3. Make sure indoor or outdoor lights have been tested for safety by a recognized testing laboratory. Check wiring and extension cords for broken or cracked sockets, frayed or bare wires, or loose connections.

4. Don't overload extension cords or electrical sockets.

5. Keep candles and jack-o-lanterns away from high traffic areas to avoid being knocked over.

Other safety tips include:
• Look for “Flame Resistant” labels on costumes.
• Make sure masks do not hamper the visibility of the wearer.
• Choose costumes made with bright colors to make them visible to motorists.
• Give Trick-or-Treaters flashlights to help them see better at night.
• Costumes should be well fitting to prevent tripping or falling.
• Children should use crosswalks and not run into the street from between parked cars.
• Parents or other responsible adults should accompany children.
• Parents should closely examine the treats collected by the children to ensure that they are safe to eat.

MILITARY HAS THE TAX CREDIT EXTENDED...

The House of Representatives voted unanimously Monday to extend the deadline for the home buyers’ tax credit for one group of Americans.

HR 3590 will allow eligible military personnel and foreign service and intelligence officers to apply for the $8,000 tax credit for one year beyond its current November 30 deadline. Those meeting the underlying requirements for the credit must also be serving overseas or have spent at least 90 days deployed outside of the country during the current calendar year. It is expected that about 350,000 military personnel and an unknown number of federal employees may be affected by the new law.

The bill, introduced by Representative Charles Rangel (D-NY) because it was thought that families serving overseas were being passed over for this one-time opportunity to purchase a home. It passed the Housed passed with 416 votes and 16 abstentions.

There is currently a battle being waged over extending the popular credit for all eligible persons and possibly even removing the requirement that the home be a qualified first-time purchase. Many credit the current tax break for a recent surge in the housing market after months of rising inventories and falling prices. Such an extension is strongly supported by the National Association of Realtors, the National Association of Homebuilders, and other major players in the housing industry, however, many argue against it on the basis of cost.

The Rangel bill will also prohibit the Internal Revenue Service from pursuing payback of the credit if the homeowner is deployed after receiving it. Under the original law a homeowner was required to occupy the home for 36 months or the credit would be recaptured. Because the military, the State Department and intelligence agencies frequently relocate their personnel and their families, some have been reluctant to apply for the credit even if they did purchase a home.

The bill must still be considered by the Senate but similar easy passage is expected.