The main factor that facilitated the decline of the Bank Foreclosure inventory (REO's) in 2012 was related to the increase in Lender Short Sale Approvals.
When a Seller is unable to sell their home at fair market value to meet the balance of their mortgage loan, they are considered "Short", thereby the Seller may elect to hire a Realtor to list their property and present the Bank (Lender) with a buyer offer for less. If the Bank elects to accept the offer, this is considered a "Bank Approved Short Sale". Thereby the Bank is accepting the buyer offer for less and relieving the Seller of the balance due. At the end of the given year, the Bank will issue a 1099 for the shortage of the loan balance, and the Seller must pay taxes to the IRS for the difference. However, the IRS Mortgage Forgiveness Debt Act (specific detail apply), can relieve the Seller of the 1099 balance.
However, this Act expired on December 31, 2013. As of April 10, 2014, the Senate House passes an extension, but it must also pass the House and Full Senate. Thereby, the outcome is unknown at this time.
The comprehensive knowledge associated with representing clients who engage in a Short Sale (purchaser or buyer), requires a expert. I have represented many successful transactions in real estate and equally I have chaired an Advisory Committee for my colleagues at Chapman Hall Realtors on the subject matter.
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