Short sales are affected by the Debt Relief Act, and that act has expired.  As of Dec. 31, 2013, the Mortgage Debt Relief Act expired and here is what that means.  If you, and this is a generic you, owed $300,000 on your house but could only get a market value of $200,000 when you sold it, and you are in a 30% tax bracket, you now are looking at having the $100,000 shortfall considered income.   This means that you are now on the hook for a $30,000 tax bill.  That is money due the IRS, and we all know the IRS does not fool around when it comes to collecting money owed.

Your congressman can get things started and re-enact the Mortgage Debt Relief Act so that you do not get hit with a tax bill of $30,000 or whatever you could be responsible for when your house is sold at short sale.  Say you "only" are forgiven $25,000 on a mortgage.  That still translates to a tax liability of $7,500 if you are in that 30% bracket.  Sounds like a tax increase to me.

Contact your congressman or congresswoman and tell them that it is time to extend the Mortgage Debt Relief Act so that we can get the housing market back on its feet, get the homeowners out from under crushing debt - or tax liability, and get our economy moving.  There are many homeowners who owe more than their houses are worth in today's market and they are not selling yet.  In Florida, where we are just about at the top of the foreclosure rate, short sales are still better than a foreclosure.  Couple this with the uncertainty of flood insurance, which is a topic for another blog, Congress can do something to help the real estate market moving forward.