Salient to Investors:
Homeowners and banks are accelerating short sales as the 2007 Mortgage Forgiveness Debt Relief Act expires at year-end, after which homeowners will be taxed on the forgiven principal and short sales will drop and foreclosures rise.
Short sales and sales of bank-owned homes accounted for 41.5 percent of home purchases in Q3 2012.
Edward Mills at FBR Capital Markets said mortgage forgiveness has become part of fiscal cliff politics.
RealtyTrac report the average price tag for short sales was $94,896 below the mortgage on the property.
Daren Blomquist at RealtyTrac said:
- short sales are better for the real estate market than sales of bank-owned properties – the average price for a short sale was $186,000 in Q3 versus $161,954 for an average bank- sale price.
- bank-owned properties are often unoccupied for 6 months or longer, while short sales result in new owners moving in directly after the purchase.
- people will shy away from agreeing to a principal reduction because they won’t be able to come up with additional funds to pay a new bill.
Douglas Holtz-Eakin said there’s bipartisan support for extending the mortgage-forgiveness bill.
Read the full article at http://www.bloomberg.com/news/2012-12-06/short-sales-of-homes-surge-as-tax-break-to-expire-mortgages.html