Foreclosures and Short Sales – Subject to Taxes?

The IRS says there is no free lunch. If you transfer title on your home, whether voluntarily through a warranty or grant deed, or involuntarily through foreclosure, you have SOLD your home. You might be subject to taxes, even if you sold your home at a loss, either on a short sale or by foreclosure.It doesn’t seem fair. What’s worse is you might not even find out that you owe taxes until the day you open your mail to find a 1099. Source: Elizabeth Weintraub

For example: Assume a family purchased their home for $200,000, with a mortgage of $195,000. Later, they need to sell the home, and find that the value of homes in their area has declined, and they can sell for only $185,000. At the time of the sale, the outstanding balance on the mortgage might be, for example, $190,000. Thus, there will not be enough cash at settlement to repay the lender the full balance of the mortgage. In some circumstances, a lender might forgive the amount of any shortfall ($5,000 in this example).

In this example, the seller will be required to recognize $5000 of income (the forgiven amount of the debt) and pay tax on it at ordinary rates. Thus, the seller, who has experienced a true economic loss, is required to pay tax on any phantom income, even though no cash has changed hands and even though he has experienced a loss. Similar results would apply in a foreclosure where some debt amount remains outstanding at the conclusion of the proceeding.

Any lender who forgives debt is required to provide a Form 1099 information report to the borrower and to the IRS stating the amount of the forgiven debt. The Form 1099 will be required in any circumstance when a debt is forgiven, whether it is a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of a debt. More information about Foreclosures, Short Sales and Taxes 

Jill Denton ~ Hometown GMAC Real Estate and Changing Spaces Interior Redesign & Staging

Paint Paralysis?

 

The dizzying array of color choices and their associated names are enough to give a homeowner a case of Chromophobia – the fear of colors. How do you decide what color(s) to use when there are so many options?

Choosing the right paint color(s) for the interior or exterior of your home can be frightening.  Most of us have gone through the process to find the right paint color. I know some people who have spent hours going to paint stores looking at swatches, bringing a some home looking at them again, then painting swatches on their walls – unable to decide which is the right color.  Some have even gone as far as to paint the entire room, only to find out it was the wrong color.  That’s so frustrating.

I find it helps to bring in a 3rd party.  You can always start with your friends, but sometimes they each have their own separate opinions.  Maybe get the opinion of someone whose house/colors you like.  Other tip would be to look through magazines and tear out pages of pictures of rooms that you like.  Don’t analyze it, just do it.  Once you’ve finished, spread the pictures out, I think you’ll find a few common threads.  (ie, each of the pictures you selected have the same wall color, or each of the pictures you selected all have the same predominate color throughout the room, etc. You could also try  Benjamin Moore Personal Color Viewer where you can try thousands of Benjamin Moore paint colors on sample images of house exteriors and interior rooms, or import a picture of your own house. This inexpensive program comes on a CD, or you can download it. (Mac OS X and PC compatible). I have the program.  It’s kinda fun to play with and it can give you a general idea of what your home/room would look like painted red, yellow, green, blue, etc.  But I find that the colors you see on your computer screen are not what you’ll see of your wall, so you can only use it to get a general idea of color.  For example, if you can’t decide between painting a room red or blue, you could upload a photo of the room and try a couple varisions to see which way to go.  If you’re still at a loss and feeling overwhelmed with the hundreds if not thousands of paint color choices, get a color consultation so you can start enjoying your beautiful new space.

I want to hear about your color catastrophes.

How did you solve the problem? Or are you still trying to find the right color?

Jill Denton ~ Hometown GMAC Real Estate and Changing Spaces Interior Redesign & Staging