Answer: If your lender forgives part of the debt against you, they are supposed to issue a 1099 to alert you and the IRS of the canceled debt which is theoretically taxable. However, in the case of your principal residence (resided in for at least 2 of the last 5 years) you may be able to exclude up to $2 million of debt forgiven under the Mortgage Forgiveness Debt Relief Act of 2007. But do not wait … The Act expires at the end of 2012 if not extended by Congress.
Short Sales
What makes the better deal today, a foreclosure or a short sale?
Although either can make an excellent investment, both have pros and cons. The foreclosure inventory has been somewhat depleted this year, making these properties more difficult to obtain. Short sales are much more plentiful, but can take an extensive period of time to complete.
The foreclosure inventory is low mostly the result of the robo-signing debacle of 2010. Many of the nation’s lenders chose to curtail their foreclosure activities while reviewing their processes and procedures. There is a great deal of “shadow” out there, and it is just a matter of time before these properties start hitting the market. Some lenders are even considering interim options such as long term rental agreements to deal with the issue of abandoned properties.
The best advice is to develop a relationship with a Realtor that specializes in such properties because the best deals do not last long. Investors represent more than 50% of the buyers in certain market segments and are rapidly scooping up the best deals.
For information on Destin, Ft. Walton Beach, Seaside and Emerald Coast short sales, bank foreclosures and general real estate topics, please visit www.FloridaBrokers.com , www.DestinFloridaRealEstate.com or email us at smith@realtor.com