The Mortgage Indebtedness Relief Act ends December 31st, 2012. This is for people who do a successful short sale where they do not have to pay tax on the lender's loss as income. If you had a $50,000 loss and a 25% tax bracket you would owe the IRS about $12,500 plus interest and penalties. In a short sale you are exempted if it is your primary residence and a few other situations. So you are reading this and saying but this is February, I have plenty of time! No you don't, and if you are a financially distressed homeowner in Oklahoma City Oklahoma listen up and check out this time line.

You list your property on March 1st and 90 days later you have an accepted contract so now we are in June, and it takes another 90 days to get the short sale approved, now we are in in September. We now have 30 days to close and we are in October. This is a scenario where everything goes well. Let me give you two conplications: First you lose your initial buyer and have to get another, add 60 days. Second, you have a second mortgage, or maybe a third party lien like back homeowners dues, again 60 days. heaven forbid we have a tax lien to work on, so you can see that even listing on march 1st can get us to the end of the year and any delay that goes into 2013 means that you may owe taxes.

You need to act now! The later you go the more jheopardy you put yourself in. But you say, what if the Congress extends it? That could happen and I hope it does, but with an election year and a divided Congress that doesn't seem to agree on anything, I would not want to put my faith in that process. Besides, if you are 3 months or so behind now it is the time to act becasue we also have a foreclosure process in motion and the closer to sheriff sale transfer, the harder this gets.   

Joe Pryor & Charlene Humphreys, Distressed Property experts

joe@joepryor.com

chumphreys2@cox.net