Short sales have quickly become the method of selling a home in Las Vegas. This is for a number of reasons and the main reason is because of necessity. With so many home owners in Las Vegas owning far more than their home is worth, there often seems to be no other way to keep the real estate market alive. It can be said that this is a good deal for home owners but it really is just a way to move on with life. As people have begun to realize Las Vegas Real Estate is not going recover quickly, if ever, they have decided it may be better to get out from under their mortgage debt now. Of course the government has added an incentive to this by creating the mortgage debt relief act but that will soon be over and people will be left to other devices to figure out how to deal with their outstanding mortgage debt.
It is a given that the IRS wants to get their share of every one's pie and when people face crisis, such as short sale or foreclosure, the IRS still thinks that is a blessing for you because you have had debt relief. They failed to understand that most of the time hardship is the reason for people having to leave their home or be evicted. But the often unknown fact is that any amount of debt that is reduced, the borrower has to report that as income on their tax forms.
During the recent real estate and housing meltdown, the government decided to give people a break on this so called "income". They Mortgage Debt Relief Act was created and will be ending as of December 31, 2012. Right now the debt relief home owners receive is not considered taxable because of this law. It was only a temporary law that was to be phased out. Most people had no idea that the real estate crisis would be so long nor did they think the economy would be so bad this far into the crisis. However, Las Vegas is still in the very deepest part of the housing crisis and still over 70% of home owners are underwater. This has created a void of inventory and with out the short sale option, real estate business would have been ground to an absolute halt. This relief act was really just another form of government stimulus to give some lift to the economy.
Las Vegas would be in even worse condition if there were no short sales. It would mean no inventory and absolutely no business for Realtors. Unfortunately the desperation of Realtors and Real Estate companies has often pushed people into short sales when it really many not be the best option. This will prove to be even more the case after the first of the year as Realtors will push for business. Already realty company executives are lobbying the government and Presidential candidates to keep the debt relief act in effect in order to keep the real estate business afloat.
I suspect there might be a conspiracy between the banks and the government that will rear it's ugly head after the election. It will be the perfect opportunity for banks to put their REO property back on the market and command premium prices because their will be no competition. The inventory could easily shift back to 70% bank owned homes as people figure out they can not afford the tax bill that comes with a short sale. There will be no options for sellers unless they are insolvent. See www.consideritsoldlasvegas.com for an article that discusses the insolvency issue and how to figure out if you may qualify.
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