Are you losing sleep trying to keep up with your mortgage payments? Are you considering a short sale in Baltimore? Many of our current and former clients delayed in contacting us for assistance because they were concerned that the deficiency (the difference between the loan amount and sale price) was too large for their lender to approve. In my 10+ years of handling short sales in the Baltimore metro area, the most frequently asked question from new short sale clients during our intake interview is, “will the lender take this big of a loss?” In most cases the answer is yes. Not only will they approve a large loss, they typically waive the right to collect the loan shortage.
We have negotiated sales of homes where the deficiency has been as low as $4,000.00 and as large as $415,000.00. We discovered on most occasions a loss is a loss to the lender irrespective of how small or large the amount. However, the IRS generally treats any discharged debt as taxable income and it is included in your gross income which could lead to a tax liability. The Consolidated Appropriations Act of 2020 allows some borrowers to exclude up to one million dollars ($1,000,000.00), up to two million dollars ($2,000,000.00) for married couples, of forgiven debt from their taxable income for short sales of principal residences. While this provision is set to expire in 2020 it will apply to contracts entered into in 2020 that settle in 2021 so it is best to act quickly.
If you’re thinking about a short sale in the Baltimore area don’t delay any further, call our real estate law firm at 410-276-1983 to discuss the details of your situation.