Part of Washington’s bipartisan agreement to avert the Jan. 1 "fiscal cliff" is the extension of a tax break that will make Southern Nevadans who are considering a short sale or foreclosure breathe a little easier, the Mortgage Forgiveness Debt Relief Act.
"Extending the Mortgage Forgiveness Debt Relief Act is so extremely important for Southern Nevadans who need to sell their homes but are underwater on their mortgages, and are either considering a short sale or in the process of one. Because of its extension, qualified homeowners who have to unfortunately leave their homes due to a short sale in 2013 will not have to pay taxes on their misfortune and can avoid further financial loss," said longtime Las Vegan and mortgage professional Rick Piette, owner of Premier Mortgage Lending.
Signed into law in 2007 and scheduled to expire Dec. 31, the act exempts most homeowners who complete a short sale or experience a foreclosure on their principal residence from having to pay federal taxes on the canceled balance of their mortgages of as much as $2 million (or $1 million if filing separately).
Borrowers who receive partial loan forgiveness from lenders may also benefit from this exemption. Without the exemption, debt that is forgiven or canceled by a lender is normally considered income by the Internal Revenue Service and may be taxable.
"This act’s extension is big news for Southern Nevada, because there are thousands of homes with delinquent mortgages. As banks move forward on these delinquencies in 2013, homeowners who have been trying to figure out their options may finally decide to move forward with a short sale," Piette said.
"In 2012, thousands of Southern Nevadans were able to avoid taxes on the forgiven debt of a short sale, and now thousands more will do the same in 2013," he said, citing statistics released last week by the Greater Las Vegas Association of Realtors that showed short sales accounting for a record 45.8 percent of the 2,961 homes sold in December 2012 .
"Deciding whether to proceed with a short sale is a very personal decision with many, many considerations. One thing that people need to figure out is where they are going to live next. Many people are surprised to learn that there are private lending programs out there that can help them buy another home as soon as a day after a short sale, including our Another Chance Nevada loan program," Piette said.
The program connects individuals who have experienced a short sale or foreclosure with private and institutional portfolio lenders who offer 15- or 30-year, fixed-rate loans at interest rates that are typically higher than traditional mortgage rates.
Full-documentation guidelines are followed and at least a 20 percent down payment is required. The down payment can come from personal funds or can be obtained as a gift from family members.
Borrowers may close within 30 days from the time of loan approval, and may refinance the loan at any time without penalty.
Among the dozens of Realtors whose clients secured a home loan through the program in 2012 is Bret Runion. The owner of Desert Sun Realty said the program provides residents more choices of where to live and the opportunity to begin rebuilding equity.
"Some of these folks who have experienced a short sale or foreclosure think that their futures are sealed and that they must rent, and the Another Chance Nevada program lets these buyers take advantage of today’s great housing prices. We help them get back into the market and to begin to recoup their losses," Runion said.
In 2012, hundreds of Southern Nevadans purchased a resale or new home with an Another Chance loan. The Las Vegas-based lender is working with Beazer Homes, D.R. Horton, Dunhill Homes, Harmony Homes, KB Home, Pardee Homes, Pulte Homes and Del Webb, Richmond American Homes, Ryland Homes and William Lyon Homes.
"Another Chance Nevada is helping stabilize the Southern Nevada real estate market by generating more buyers. We currently have more buyers than sellers. This is why the prices have consistently gone up for the past several months. Another Chance Nevada buyers are also owner-occupants. This helps stabilize the neighborhoods," Runion said.
"We are very confident that the Las Vegas realty market is moving in the right direction, and in the next five to 10 years we see a tremendous amount of appreciation potential. If you are not able to participate and own real estate, you are not able to take advantage of that."
According to both Runion and Piette, the first step that individuals interested in buying a home should take is to participate in the mortgage prequalification process. Premier Mortgage Lending provides complimentary mortgage prequalification to help people determine if they may qualify for a traditional mortgage or Another Chance Nevada.
For additional information or to schedule an appointment for mortgage prequalification, call Premier Mortgage at 485-6600 or visit www.AnotherChanceNevada.com.
Premier Mortgage Lending is at 8689 W. Sahara Ave., Suite 100. The company is a member of the Las Vegas Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association and is an affiliate member of the Greater Las Vegas Association of Realtors.