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Tax break set to expire; homeowners look to complete short sales

At the end of the year, the Mortgage Forgiveness Debt Relief act will expire if Congress does not reauthorize the bill. This looming deadline has many distressed South Carolina homeowners worried, because the law provides that these individuals do not have to pay taxes on most short sale transactions.

Not only do homeowners wishing to sell their homes on short sale need to sell their house on the open market, but they also have to receive approval from their mortgage lender. As we've previously covered on this blog, that can be a tricky process if homeowners try to navigate those waters on their own. With every passing day, the tax deadline grows closer; as a result, many will be pushing hard to complete their short sales before year's end.

Though there are some obstacles to surmount in the short sale approval process, a large number of homeowners are pursuing this as a viable alternative to foreclosure. In fact, the National Association of Realtors reports that 10 percent of all home sales were short sales this past August.

Fortunately, some lawmakers realize that troubled homeowners would only be harmed further if the tax provision lapses. As such, many are hoping that Congress will be able to unite and renew the bill before it expires.

After the end of the year, many will still view a short sale as a proven way to work through a large mortgage debt, regardless of whether or not the mortgage relief law is reauthorized. Individuals are relieved of their mortgage debt and lenders often take a smaller loss on a short sale than they would with foreclosure. As such, both parties stand to benefit from moving forward with these real estate transactions.

Source: The Record, "Homeowners rush to complete short sales to beat a tax deadline," Kathleen Lynn, Oct. 21, 2012

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