Is Cancellation of Mortgage Debt A Good Thing?

Myrtle Beach HomeMyrtle Beach Home – What Happens After Debt Is Settled?

There is an assumption in today’s market that once a Myrtle Beach home is foreclosed on, the homeowner simply walks away and the remaining balance is forgiven. In some instances this is true; however, what a Myrtle Beach home owner doesn’t realize is that the amount of debt that is forgiven can be seen as taxable income by the IRS. There are exceptions to this rule, however, until a few years ago the mortgage holder was required to pay taxes on the amount forgiven by the bank. In December of 2007, a law was passed that gave some relief to troubled home owners. What you need to know is that this relief will expire on December 31, 2012 – this year.

General Guidelines for Cancellation of Dept On A Myrtle Beach Home

As a general rule, if a lender takes the action to forgive all or a portion of an individual’s financial obligation, the amount that is waived is considered taxable ordinary income. Some of the exceptions are insolvency, bankruptcy and certain other situations. You need to consult with your accountant or tax lawyer to determine if this applies to your specific situation before you consider selling your Myrtle Beach home.

Mortgage Debt – until December 31, 2012, a Myrtle Beach home owner that is forgiven on the balance of a mortgage after the home is sold will not be liable for taxes on the balance. The mortgage cannot be on a secondary residence, it must be on the primary Myrtle Beach home. The amount that is excluded from taxation must be less than the original mortgage amount plus any renovations or improvements.

Does This Law Apply Only to The Sale Of A Myrtle Beach Home?

No. In the instance of a short sale (the amount the Myrtle Beach home sells for is less than what is owed) a mortgage lender may forgive the remaining unpaid balance on the Myrtle Beach home. With a Myrtle Beach foreclosure is involved and the entire debt is forgiven. Also, in some the instance where a home owner continues to live in the home and the mortgage holder reduces the amount owed, the amount of the reduction may be considered taxable after the end of the current law.

There is a misconception that if a home owner enters into a short sale or foreclosure they have incurred a loss that can be claimed on their tax return. This simply is not true. The IRS looks upon this as a personal loss and cannot be used as a capital gains loss or a loss against ordinary income.

What About Refinanced Myrtle Beach Home Mortgages?

This law only applies in a limited set of circumstances. The relief provision only applies to refinanced mortgages that are below the original mortgage amounts plus any improvements made to the home. As a general rule, tax relief does not apply to a home equity loan or a second mortgage in instances where the funds were not used for home improvements. In these instances, the amount of the loan that is written-off or forgiven is deemed to be taxable income to the home owner.

If you are in a situation where you plan to stay in your home but the value of your Myrtle Beach home has decreased below what you owe on your home, this IRS ruling would not apply. The ruling only applies at the time of sale or foreclosure on the Myrtle Beach home or when there is a reduction in the amount owed (i.e. reducing the amount of the mortgage) with the lending institution.

Keep in mind that not all mortgage holders will forgive the debt when the value of the property declines or the Myrtle Beach home goes into foreclosure. In some instances they will institute a repayment plan especially if the Myrtle Beach home owner has other assets from which they can draw. It is totally up to the mortgage holder whether they will forgive any unpaid balance after sale.

How does the IRS know you have forgiven debt? The lending institution is required to provide the government with a 1099 showing the amount of the written-off debt. The Myrtle Beach homeowner then must file a form 982 with their next year’s tax return. The amount will then be carried over to your 1040 return as taxable income.

There are many things you need to consider before you put your home up for short sale. You will want to check with a Myrtle Beach short sale expert and with your accountant before making any final decisions.

Call us today for a consultation on how to handle the sale of your Myrtle Beach home.

Jerry Pinkas Real Estate Experts
854 Jason Blvd #G, Myrtle Beach, South Carolina 29577
(843) 839-9870

Bottom Line Is That You Want It Sold – Tips To Get It Done

Myrtle Beach Home SoldNo matter what the economy selling your Myrtle Beach home can be a stressful process. In today’s economy, this stress is higher than ever. The most common reason for this stress is that the average Myrtle Beach home owner is not educated on how to be effective with the sale of their home.

Helpful Advice About Myrtle Beach Home Selling

Regardless of the reason for selling your home, whether it is to avoid foreclosure or simply to take advantage of the lower prices on Myrtle Beach real estate and upgrade your home, you will want to have your home inspected prior to putting your home on the market. The last thing you need is to have a problem crop up when you have a buyer on the line. You can save a lot of stress and headaches if you have your Myrtle Beach home checked out ahead of time.

One hard thing for most Myrtle Beach home owners is to realize that the value of their home if NOT what is listed on their tax-assessment documents. One major factor in the selling price of your home is the number of Myrtle Beach short sales and foreclosures in your neighborhood. Another factor is what would someone be willing to pay for a home in your area? Don’t overprice your Myrtle Beach home for the market in your area unless you are willing to sit on your home for a long time.

Next, you will want to be accommodating when a Myrtle Beach real estate agent for the buyer, referred to as the buyer’s agent, makes a request to show your Myrtle Beach home. If you are picky about when your Myrtle Beach home can be seen, you are limiting the exposure to potential buyers. You could easily lose out on a potential sale for your Myrtle Beach home.

Always keep in mind that potential buyers are interested in your Myrtle Beach home not into your decorating ideas. Don’t spend a lot of time and money making sure that your home is perfectly decorated. Potential buyers have their ideas of how they would decorate a home. Make sure that your Myrtle Beach home is free of clutter and unnecessary furniture. You will want lots of open space for the buyer to use their imagination on how they would decorate your Myrtle Beach home.

Even though we suggest that you not spend money on decorating your home, a little paint can go a long way to improving the sales value of your Myrtle Beach home. Always sick with a neutral color to make the rooms look bright and inviting.

Updating appliances is also a great way to increase the probably your Myrtle Beach home will be sold quickly. If you are selling an older home, you will want to make sure the wiring is up-to-date and that you have the most efficient heat pump and water system. You will be competing against much new homes on the market and if you have updated systems, you will increase the ability to compete with newer homes.

Take a look at the curb appeal of your home. Does the siding need to be power washed? Is your lawn well-manicured and appealing? Many Myrtle Beach home buyers will drive by your home first and you always want to have a good first impression. Walk outside your home and take a look with a critical eye to see what could be improved.

Become educated about what it takes to sell home and the enlist the help of a Myrtle Beach real estate agent. They will have some great tips for selling your home. Never take offense to any suggestions a Myrtle Beach real estate agent will make. They are on your side and want to sell your home at the highest price possible in today’s market.

Give us a call today for an assessment of your Myrtle Beach home.

Jerry Pinkas Real Estate Team

854 Jason Blvd #G, Myrtle Beach, South Carolina 29577

(843) 839-9870