Sign Petition to Extend the Mortgage Debt Forgiveness Act

Petition to Extend the Mortgage Debt Forgiveness Act

On December 31, 2012 the Mortgage Debt Forgiveness Act of 2007 is scheduled to expire. As a San Jose Real Estate Agent-Broker, who manages many San Jose short sales, I recommend signing the petition to extend the Mortgage Debt Forgiveness Act of 2007. 

“The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married 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.” Source: irs.gov


How does extending the mortgage forgiveness and debt cancellation act help homeowners who want to avoid foreclosure with a short sale?   Upon completion of a short sale, lenders issue homeowners a 1099.  Simply stated, the loss to the lender on a short sale becomes the gain, or income, to the homeowners.

With mortgage forgiveness and debt cancellation the income realized by a modification of the terms of the mortgage (short sales modify the terms of a mortgage) is excluded. In other words, the debt relief act allows the exclusion of income on certain cancelled debt on a principal residence. 

Mortgage Forgiveness and Debt Relief relates to taxes.  Therefore, to fully understand if you qualify to exclude income on cancelled debt on a principal residence, you definitely need to consult with a licensed tax adviser who is well versed in foreclosure tax laws.  San Jose short sale agents are not licensed to give tax or legal advice.


IRS Publication 4681 – Rev. 1/24/2011 – Cancelled Debts, Foreclosures, Repossessions, and Abandonments (for individuals) in preparing 2011 Tax Returns.

Avoid Foreclosure – get the help you need now! 

Call San Jose short sale agent, Kathleen Daniels today for a free consultation!

1-800-972-1822

San Jose Short Sales – Duty to Disclose

San Jose Short Sales –Duty to Disclose

A buyer sued his California listing agent for negligence, negligent misrepresentation, and deceit (fraud) based on misrepresentation and a failure to disclose.  The case was dismissed by the trial court. The buyer appealed. The appellate court had to decide if the listing agent owed a duty of disclosure to the buyer.

In October 2010 the Court of Appeal reversed a trial court’s judgment holding that “a real estate broker who lists a property that is so over-encumbered that it can only be sold by short sale or if the seller deposits a substantial sum of cash into escrow, the broker must disclose this state of affairs to the buyer.”  [emphasis added]

If a San Jose Realty listing agent is aware that the amount of existing liens exceeds the sales price then the listing agent has a duty to disclose this fact to the buyer. A broker can be held liable for failing to disclose any facts that materially affect the value or desirability of the property which is not known or easily observable to the buyer. This duty helps protect buyers from harm by providing information which allows buyers to make informed buying decisions.

The absence of a San Jose short sales contingency and/or disclosure indicating that the seller agrees to deposit cash into escrow may actually subject the seller to liability to the buyer for breach of contract when the seller cannot perform as promised.

A San Jose Real Estate Agent has a duty to disclose short sale status including when sellers cover the shortfall and lender approval is not required.

San Jose Short Sales –Duty to Disclose – by Kathleen Daniels, San Jose Real Estate Agent.

Time Bombs – San Jose Short Sales

Time Bombs – San Jose Short Sales

It’s what we don’t know that can cause San Jose Short Sales to catapult straight into foreclose. The real challenge is to discover what we don’t know before the foreclosure time bomb explodes.

San Jose Short Sales – Time Bombs in Escrow

We recently had the unfortunate experience of working with an untrained escrow officer at Old Republic Title Company. She became aware of an IRS tax lien on July 29, 2010 and failed to take action to ensure the lien was released so we could close on October 21, 2010.  The escrow officer also did not send the updated preliminary title report to the agents. Therefore, the time bomb ticking in escrow remained unknown to the agents, the buyers and the seller.

We had short sale lender approvals and were ready to close on October 21, 2010.  Buyers and Seller had signed off in escrow. Buyers’ funds were wired to escrow in the morning on October 18, 2010.

  • October 18, 2010 @ 3:11pm, Escrow Officer Rosa Avila sends an urgent email with the subject line: Delay in close of escrow.

Email message: IRS informed me today that they will not provide a release or any kind of written confirmation of release for their liens until approx. 11/30/10. I am currently contacting the short sale lenders to request an extension.

Ka-Boom!!!!

San Jose Real Estate & San Jose short sale agents must understand that importance of choosing a title and escrow company. Failing to choose a title company that is trained in short sales may result in the reason San Jose Short Sales do not close; their buyers and sellers are damaged; and after working 4-6 months they do not receive their hard-earned paycheck.

Time Bombs- San Jose Short Sales by San Jose Real Estate Agent – Kathleen Daniels

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