Many Sellers in today's real estate market are having to consider a short sale to get out from under a house that has lost value from the time of purchase. A short sale is when a Seller negotiates with their lender to pay them less than the mortgage owed at the time the home sells. However, one thing that a seller must know is that just because they make no profit does not mean that there are no tax consequences.
During a short sale the lender has agreed to less money than is owed for a property; when this debt is forgiven by the lender it is usually considered as income by the IRS. I am no tax expert, but I would definitely recommend talking to an accountant before deciding to do a short sale. Some Sellers have been shocked to find out that they owe taxes for the amount for the loan that was forgiven by the lender.
Thursday, June 11, 2009
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