Last Friday, December 21, 2007, President Bush signed into law a bill that will temporarily (for 3 years) keep households that negotiate a short sale on their home from having to pay income tax on the difference between the sales price and the owed mortgage amount. This is a great relief for many homeowners who are stuck in adjustable rate mortgages (ARMs) that they can't afford and anyone else who simply can't pay their mortgage because of job loss, etc.
I see this as a very big step in the right direction for the struggling real estate markets across the nation and here in the Midwest in particular. In Ohio we have a large problem with foreclosures and the media has been so kind as to point this out on an almost daily basis. This bill has the potential to have a very positive effect on this problem and there are a couple of big reasons why.
Traditionally, foreclosures are often homes that are beat up and abused by their former owners. This is not a surprising outcome of the process, but it makes the re-sale of the home much harder and usually causes a larger reduction in price. With this bill being signed into law it will make the pre-foreclosure sale (otherwise known as a short sale) an even more attractive option than before. This bill will truly allow the homeowner to put this whole thing behind them and allow them to have the credit benefits as well.
In my experience short sale properties, although not perfect, tend to be in much better condition than many foreclosures because the seller has an interest and benefit in selling the property. A short sale allowing the seller to wash their hands of the matter completely also makes the likelihood and length of vacancy much shorter than a foreclosure, which in Franklin county can take up to 18 months to complete. This also helps the resale value of the neighborhood and helps to keep the homes from bringing down the whole area by adding to crime and becoming an eyesore.
Although short sales are not the type of sales we would like to see in the real estate market for overall prices, they pale in comparison to the effects of the same number of vacant foreclosures taking up to 18 months to sell at auction before they are even marketed to the public.
Troy Marsh
Lead Buyer's Specialist & Listing Partner
TroyRE@gmail.com - Email
www.TheGoldKeyExperts.com
