Overall, the real estate market on Long Island is coming back. But when it comes to foreclosures and short sales, it is a good news, bad news situation. Let's start with the bad news:
There are still a lot of homeowners who are hurting. By this I mean that they are facing a serious challenge with their mortgage. Many will be facing the ultimate challenge this year-foreclosure. The banks have paid the price for their missteps like the robo-signing scandal and streamlined their procedures as regards to the foreclosure process. What this means to those who are three years or more behind in their mortgage payments, the hourglass is almost empty. When a mortgage holder forecloses, the bank takes title to the property and places it up for auction. The residents of the home have their personal posessions taken to storage (for 30 days) in trucks and the family is literally left standing on the street. If you have any idea of the financial and emotional toll this could take, do not let this happen to your family! All projections point to an increase in foreclosures this year over 2012.
Now for some good news:
If you are facing the same mortgage challenges, putting your home on the market as a short sale may be a viable option. A short sale occurs when a property is being sold for less than the total amount of liens on the property. Example: Oustanding liens on the property (including 1st, 2nd, or even a 3rd mortgage, plus any additional liens) total $400,000. The property is being sold for $280,000. This leaves the lien holder(s) "short" by $120,000. Fees, penalties, and other charges can push this shortfall even higher. In addition, prior to the Mortgage Debt Relief Act of 2007, the homeowner was responsible for income tax on the shortfall, because the IRS considered this amount to be regular income. The Act changed all that, and allowed homeowners to walk away, albeit without equity, but they faced no income tax consequences. The Mortgage Debt Relief Act of 2007 was set to expire December 31, 2012, but Congress has extended it until the end of 2013. All indications, though, are that this may be the last chance for homeowners to benefit from the Act's no-income-tax-liability provision.
What's the bottom line? If you are facing the possibility of foreclosure, you still have options, but time is running out! Put pride and fear aside, and TAKE ACTION!