No More Phantom Income from Real Estate Short Sales

Thursday may mark a dramatic increase in real estate short sales due to H.R. 3848 being signed as law by President Bush.

For the next three years mortgage debt forgiven by lenders when troubled borrowers negotiate real estate short sales or mortgage workouts on their primary residence that involve forgiveness of part of their debt will no longer be counted as phantom income by the IRS.

This will must likely lead to a tremendous growth in real estate short sales but what will it do to prices?

Already in certain parts of the country even with the phantom income, some agents are reporting that real estate short sales account for as much as 30% of all current activity in parts of California.

With this new law, there is no down-side to doing a short sale so many more owners will seek this as an option.

Maybe now, mortgage lenders will be more prone to accepting real estate short sales as it helps keep foreclosures off the books which keeps wall street happy.

Question is, will this help stabalize the free falling market or simply speed up competition of "must sale" homes and push prices down faster?

4 Months and a 598% Increase in Real Estate Short Sale Listings

Hello Everyone,

It's been very busy to say the least. Here is an update regarding real estate short sale activity in the local mls which serves most of San Bernardino, Riverside and all of the SG Valley.

Current active short sales: 1167

Wow.

On Feb. 14 of this year, there was 195 total active short-sale real listings. Just 4 120 days / 4 months later we have 598% increase in active short sale listings.

Additionally, yesterday Realtytrac and Inman reported that Riverside-San Bernardino was number 3 on the list of total foreclosure filings nationally. So we have more inventory coming.

20% of Existing Homes for Sale in Sacramento are Short Sales

USA Today has an interesting article about the Sacramento real estate market. According to the report....

• 1 in 5 homes listed for sale is a short-sale that translates to 20% of all listing in the area.

If you remember in 2005 Sacramento was one of the fastest appreciating areas in all of California... quite different now, according to the NAR the median price home fell 4.3% from last December.

These number of short sales make competition for the buyers even more difficult as home sellers are now competing with these "must sell" listings.

There is current a 4.3 month inventory of listings which does not include the 3.5 months of new construction. Additionally, there is a big pipeline of homes in the foreclosure process which will hit the market within the next 3-6 months further depressing values.

As I have mentioned in the past, real estate short sale will continue to represent a significant part of the market.

View USA Today Article

Real Estate Short Sale Updates...

Real estate short sale watch.

- Active: 195
- Pending: 29

Here is an update of the activity. Small down turn in the number of of active listings but still significantly higher than 6 months ago.

Real Estate Short Sales in the News

According to this article in San Luis Obispo Tribune they are reporting that short sales are also on the rise there.

There was an error in the article that states...

"With a short sale, however, sellers cannot get any money from the sale once
the debt is forgiven. The seller also still has to pay federal income tax on
that money."

This is actually incorrect. There is a tax law that states if you are insolvent you maybe able to get "ghost income" forgiving as long as the amount does not exceed $50,000.

If you are facing this situation it's important to see your tax accountant to truly understand your situation.

Real Estate Short Sale Stats

Here is a little new year update. The upward trend of real estate short sales continues...

- Active: 268
- Pending: 26

We have been recieving more inquiries regarding short sale services for homeowners.

This is for Southern California from Pasadena to Rancho Cucamonga, North of 60 freeway.