Yes, here is yet another article from a Realtor about short sales. If you, or someone you know, own a home, need to sell it and owe more than it is worth in today's market, you or they may be in a short sale situation. If so, you will be asking your lender to forgive a significant amount of money. So far, nothing new.

What many people don't yet understand is that as of now, the Mortgage Debt Relief Act of 2007 will expire on Dec. 31, 2012. What this means to the homeowner in a short sale situation is that if they do a short sale that closes after Dec. 31, 2012, under current law, the forgiven debt may be taxed as income. Presently, if an owner has done a short sale for their primary home, the Mortgage Debt Relief Act has allowed taxpayers to exclude income from the discharge of debt, which means the forgiven debt is not taxed.

Before the Mortgage Debt Relief Act was put in place, the IRS considered forgiven debt as taxable income. Since 2007 and thru 2012, forgiven mortgage debt, for a primary residence, has not been considered taxable. Here is the issue, if Congress does not extend the Mortgage Debt Relief Act, or amend it in some meaningful way, any debt forgiven through debt restructuring, or short sale, may be considered as taxable income. An example would be a homeowner is forgiven $50,000 in mortgage debt when their home sells, in February of 2013. That $50,000 could be added directly to the homeowner's taxable income!

Now, if you are a homeowner who is considering a short sale, or if you feel that in the next several months you may be in a short sale situation, and if you believe that the Congress is going to agree to extend the Mortgage Debt Relief Act to 2013 or beyond, relax. If you have a hard time believing that Congress can agree what time it is, then you should be concerned.

Short sales happen for numerous reasons, mostly as a fact of life that our real estate market has suffered enormously in this recession. In the Tampa Bay area, almost every home purchased between 2004 and 2010 has a lower market value today than when it was purchased. Reasons to sell vary widely, from job transfer, to the kids have all moved out, to a death, a divorce, job loss or whatever else happens in life.

Before you do anything, consult your financial advisor and your attorney about the situation with your mortgage. Find a professional Realtor who is expert in short sales to guide you through the complex short sale process. Because of the backlog of short sales the banks are already processing, a short sale can take many months. So if you are considering selling your home and may be in a short sale situation, don't wait. Act now. You just might not have the tax relief next year that is available today.