Homeowners in southern Nevada are anxiously awaiting to hear whether the state’s Mortgage Forgiveness Debt Relief Act of 2007 will be extended retroactively, as one Review Journal specialist comments on in a Q & A column. Uncertainties in the real estate and legal industries around bankruptcy, debt, short sales, and other commonly related real estate issues are heavily on the minds of the residents of the most populated area of the state, and real estate lawyers in Las Vegas know why. If Congress doesn’t extend the MFDRA after its lapse on December 31st of last year, the real estate market is expected to see hundreds more foreclosures, and fewer short sales for 2014.
Columnist Heidi Kasama, armed with legal expertise from real estate lawyers in Las Vegas, explains the connections among these events. Sales of property are known as “short sales” when a lender agrees to accept less than what the borrower owes on the mortgage. And in 2014, because the MFDRA’s lapse, any money a bank writes off as a loss in agreeing to a short sale becomes taxable when sellers file their income taxes. Yep, that’s right: sellers get taxed as “income” for money that never existed—except in debt. This is not the most motivating of situations for sellers, muse some real estate lawyers in Las Vegas.
It wasn’t always so, and in fact, Kasama reports that short sales have previously been pretty common in Nevada as compared with other states. Short sales, while forcing a loss for most everyone, essentially work out a better deal for parties than straight foreclosures. And to provide some relief for homeowners, the National Association of Realtors has been pushing Congress to extend the MFDRA in the interest of the individual and the collective. Real estate lawyers in Las Vegas like Michael C. Van understand how foreclosures and the often ensuing bankruptcy of a large portion of a community can impact the economic interests of the entire community. Las Vegas, metropolitan and sprawling as it is, is no exception.
That’s partly why organizations like the NAR “supports an exclusion of taxation of the phantom income generated when all or a portion of a mortgage is forgiven.” Other supporters of this relief act extension are members of Nevada’s congressional delegation, indicating an investment in protecting the ability of members of the community to contribute economically. Foreclosures can be devastating, and bankruptcy “puts you out of the running” for several years. By helping to avoid these financial catastrophes for homeowners, some advocates of relief see the whole of Nevada benefitting.
Kasama cautions uncertain and anxious homeowners now, however, to “play it safe.” There is no guarantee that Congress will extend such a relief act or apply any portion of it retroactively. She also encourages homeowners to seek tax advice from certified public accountants and tax attorneys—not realtors. Finding out what’s best for each individually is a responsibility that homeowners should take upon themselves, but in the meantime, it doesn’t hurt to have your fingers crossed.