NICASTRO LAW, L.L.C.

PURCHASE AND SALE AGREEMENTS

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SHORT SALES

For additional detailed information for buyers and sellers, please click here to see the tab Frequently asked questions  (FAQ) real estate transactions.

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Please do not  hesitate to call us for a free legal consultation.

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NICASTRO LAW, L.L.C., is experienced in many forms of real estate transactions. 

Although an attorney is not a required part of the process, particularly in many states where escrow companies handle all closing transaction details, it is highly advisable.

We will protect your interests and help resolve any potential legal problems before entering a legally binding contract for the purchase or sale of real estate.  Some of the areas where we can help you are delineated on your left.  Although Roslindale Attorneys, located on the West Roxbury Line, we assist clients with closings in many areas.  Our Boston Attorneys, are often acting as Closing in Brookline, Dedham, Cambridge, Salem, Plymouth and every county registry of deeds.

ALSO FOR A SPECIAL BONUS, SELLERS, CONTACT A PARTICIPATING REAL ESTATE BROKER FOR $600 VOUCHER TOWARD LEGAL FEES AT NICASTRO LAW, WHEN YOU USE THE PARTICIPATING BROKER TO LIST YOUR HOUSE. 

CLICK ON THE LINK FOR PARTICIPATING BROKERS:

www.aboutahouse.com

WHAT IS A SHORT SALE?

Need a Short Sale Attorney?  What is a Short Sale? A short sale was designed to assist a home owner who is in financial trouble  to get out from under their mortgage debt.  A short sale is negotiated through the mortgage holder of the owner’s  home whereby the mortgage holder agrees to take less than what the owner owes on the property.  Hence, a short sale is done only with lender approval. 

A quick example of a short sale would be if a home owner owes $350,000 on their current mortgage and their home is only worth $300,000. The lender in this example would agree to take a short fall of $50,000 at closing.  Hence, the Buyer will get the property at $300,000.  Nevertheless, this is likely what the property is actually worth.  The deal helps the lender, who is able to cut its losses; but primarily the owner, who is able to get out from under the debt of a house that has come to be worth less than what is owed

In some cases the mortgage holder may completely wipe out the debt and the home owner does not have to repay the 50,000.  Some lenders may require a seller to sign a note and repay the debt over a certain amount of time. Typically the debt will be reduced and the owner may receive favorable repayment terms of the short fall..

What about the tax consequences.  If you are selling your primary residence as a short sale, The Mortgage Debt Relief Act  generally allows taxpayers to exclude income from the discharge of debt. The debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a short sale or foreclosure, qualifies for the relief granted.

The Mortgage Debt Relief Act applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion or $1 million if married but filing separately. The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition. This act was put in place for the specific purpose of helping home owners avoid the financial hardship caused by doing a short sale.

Prior to this relief act being put in place the IRS would treat the forgiveness of a debt as taxable income. The logic behind this is when you take out a mortgage there as an assumed obligation that you will be paying it back. When money is borrowed, the borrower is not required to include the loan proceeds as income because the borrower has to pay back the loan. When the obligation to pay back the loan is removed, the amount of the proceeds the buyer received becomes reportable as income because there is no longer an obligation to repay.

When there is a cancellation of debt, the lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. Eligible home owners also must complete IRS form 982 which must be included with the Federal tax return to claim the mortgage relief.

A word of caution:  If you are selling a property and it is not your principle residence you will be paying taxes on the short sale deficiency that is forgiven.