One of the lesser talked about facets of the recently passed legislation that averted (Or maybe just postponed) the “Fiscal Cliff” was an extension of the law that characterized the debt forgiven by banks due to a foreclosure or short sale as non-taxable.
Prior to 2007, if a home owner went through a foreclosure or short sale and their bank forgave a portion of the debt that they owed, then the money that was forgiven by the bank was taxable. Talk about insult being added to injury!
The law was originally intended only to be in place for 5 years, but is now extended until 2014 with the passage of the “Fiscal Cliff” package.
That’s good news for folks in the foreclosure process – the road to financial recover will hopefully be shorter for them.
It’s also good news for home buyers because that’s one less objection that a home owner may have to attempting a short sale and may produce more inventory for the market. The short sale process is difficult enough with out having additional financial burdens for the sellers.
All in all, I actually approve of something that Congress did! : )