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What you need to know about mortgage debt forgiveness

There is currently a lot of misinformation floating around about mortgage debt forgiveness – let’s examine the current policies on the topic.



cash money dollar

cash money dollar

The government never asks me

I received no less than three phone calls last week from people who wanted to know if I had heard anything about whether the Mortgage Forgiveness Debt Relief Act of 2007 was being extended. I’m flattered that folks see me as all knowing when it comes to issues in the distressed property world. However, when it comes to governmental decisions, understand that nobody contacts me to consult.

What is the Mortgage Forgiveness Debt Relief Act of 2007?

Initiated by President Bush, this Act was a tax break that saved struggling homeowners from paying thousands of dollars to the IRS. Namely, qualifying borrowers (generally struggling homeowners) in certain situations would not be responsible for paying taxes on any of the forgiven debt associated with a short sale, a foreclosure, or a deed-in-lieu of foreclosure.

Lenders report the amount of debt forgiven on the 1099-C, which is sent to the borrower. It is the borrower and his (or her) accountant that would be responsible for addressing the debt forgiveness correctly when completing income tax filings.

Prior to the enactment of the Mortgage Forgiveness Debt Relief Act of 2007, if the short sale lender forgave debt, borrowers were responsible for paying the income tax on the amount of forgiven debt at their current tax rate. Remember that the current Act does not apply to all short sales, foreclosures, or deeds-in-lieu.

Currently, the provision applies to mortgage debt forgiven through the end of 2013. So, for those qualifying borrowers participating in short sales, the only way that they might be able to receive the benefits of this provision is if the sale is completed prior to the end of the year.

Troubles with the 1099-C

Just recently, I had a conversation with a local CPA. He told me that he and his colleagues had noted that often the information provided by the lender on the 1099-C (after the short sale or foreclosure) is not accurate. “Mortgage interest,” he stated “and the amount of debt canceled are to be reported in two separate boxes on the 1099-C, and often times the banks are clumping the interest in with the amount of debt canceled in a single box.”

In order to assure that borrowers have accurate records and just in case they are subject to a future tax audit, it would be a good idea to retain the settlement statement from the purchase, the settlement statement from the sale, and any documentation that shows the original mortgage amount. That way, just in case the 1099-C has been completed incorrectly, the borrower (taxpayer) has paperwork that demonstrates the correct totals.

Future forgiveness

What will happen to the housing market if the Mortgage Forgiveness Debt Relief Act of 2007 is not extended?

While it is always tough to predict the future, many prospective short sale sellers may not list their homes after the end of the year because of their concern about the additional taxes they may have to pay on debt forgiven. Will that lead to more borrowers intentionally letting their homes go to foreclosure? It might. Considering what over 10 million borrowers are still underwater and another 8 million are walking the tightrope, if there is no extension to this tax act, 2014 could be a really interesting year in the housing arena.

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?



Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.



aging housing inventory

aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.



zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub,, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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