Can a Short Sale Reduce Your Taxes and Save Your Credit Score?
The work of a Bronx short sale attorney might appear to be somewhat grim. In fact, however, such lawyers are problem solvers ― short sales help distressed homeowners find smart, livable solutions to the challenges of mortgages that are underwater and no longer affordable.
The bottom line on short sales is they provide a fresh start. Before you begin your search for a Brooklyn short sale lawyer, understand the key benefits of selling by this method versus a traditional foreclosure or bankruptcy:
- Banks want to do it. They do not have to hold a property for an extended foreclosure cycle, which for them is a protracted and expensive legal process.
- You benefit from federal programs. The Home Affordable Foreclosure Alternatives (HAFA) program, as well as the Mortgage Debt Relief Act of 2007 (now extended through the end of 2013), reduces your tax burden after the sale and might even provide up to $3000 in relocation expenses.
- Your credit report is improved. Short sales have less of a negative impact on the credit report of an underwater homeowner than would a foreclosure.
The extension of the Mortgage Debt Relief Act of 2007 provides important relief, as the Federal Tax Code otherwise treats forgiveness of debt as income. For the seller who is forgiven tens or even hundreds of thousands of dollars in a short sale – up to $2 million – that reduction in “income” can make a huge difference at tax time.
Adhering to the rules of these federal and state statutes relative to short sales can be complicated. The Law Office of Gregory Messer in Brooklyn works with homeowners in short sales throughout New York City and on Long Island.