This has become much more common thanks to the fact that the economy has taken a few dives in the last few years. With the real estate drop in 2008, the U.S. economy has still been taking a while to recover from the slowdown of growth and the increase in unemployment. In the last year or two, things have gotten a bit better for many, but there are still many more that are finding that they are burdened with debts that they are unable to pay – and thus the option of a short sale is appealing.
However, the short sale may no longer be an option in the near future…
The Mortgage Forgiveness Debt Act was passed in 2007, and it give homeowners in need of financial relief that break they needed. However, with the expiration or cutoff date for the act only a few short months away, homeowners will have to be quick on their feet if they want to short sell their homes before they are foreclosed on by the bank or mortgage lender.
This means that more and more people are going to be taking advantage of the short sale option in the near future, as they will be in a hurry to short sell their home and get out of debt while they still can. While the cutoff for the Act doesn’t mean that short sales aren’t possible, it does mean that owners of homes that have been short sold will need to pay taxes on the money given them from the bank – a serious problem for those who are financially strapped.
Foreclosures also appear to be on the rise, especially thanks to the fact that more and more people are finding that their current economic situation is putting on the pressure – often too much for them to be able to handle it. While the economy is recovering and the housing market is improving, the truth is that there is still a large number of people who are living in houses that they are unable to afford.
For these people, the risk of foreclosures is much higher, but it may not be immediate. It may take a few more months for them to realize that they are unable to pay the high mortgage and interest rates, and by then the Mortgage Forgiveness Debt Act will have expired – thus reducing the attractiveness of the short sale.