New Law Affects Sellers of Homes in Short Sale

 

This summer Oregon Governor John Kitzhaber signed House Bill 2916 into law.  Big deal, right?  Well, if you are trying to sell your home at a price “short” of what you owe your lender then it is a big deal.  One of the little known facts of short sales before this law was that even if your lender agreed to let you sell your home at a price below what was owed the lender could still come back to you to try to collect the difference.  So just when you thought you were finally out from under that house that wasn’t even close to being worth what you paid for it you get a letter in the mail from your lender that says, “You still owe us for the house you just sold.”  Now, with the passage of this bill, if the lender writes off the residual debt from your short sale and reports it to the IRS as being canceled then your lender is prohibited from seeking payment from you for that debt.  The key word is “IF.”  The lender now has a decision to make.  Do they write of the debt as an expense or come after you for the balance?  Before this bill passed they could do both.

 

If you find yourself in a short sale situation there are two people you need to talk to in addition to your bank.  One is your realtor and the other is your accountant/tax preparer.  A short sale is not a simple transaction and is not without consequences for the seller.  It is important that you make an informed decision because whether you short sale or let the bank foreclose the outcome can follow you for years.

 

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About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.