According to new data released by Trulia, Las Vegas short sales are on the rise, and are quickly overtaking bank-owned home sales. A remarkable 498 homes sold through the short sale process during the first half of June 2012, while only 434 homes owned by lenders sold and closed during the same time frame.
What is happening? Why are so many people jumping on the short sale bandwagon?
Mortgage Debt Relief Act Expiring
One of the most likely reasons for the rise in short sales in Las Vegas is that the Mortgage Debt Relief Act is set to expire on December 31, 2012. While there has been talk that it will be extended, as of right now, there is nothing set in stone. What the Act essentially allows homeowners to do is to not be taxed for any deficiency amount forgiven during the short sale process.
Consider this as an example. If you have a residence that is worth $500,000, and you end up selling it through the short sale process for $425,000, there would be a deficiency of $75,000 that would likely be forgiven by your mortgage lender. Usually, the Internal Revenue Service (IRS) would count that $75,000 deficiency as taxable income. This means that you would be stuck with a huge tax liability. However, with the Act in place until the end of 2012, homeowners who sell their primary residences through the short sale process with a deficiency release will also be released from any tax liability related to the deficiency.
The Current Real Estate Market
Another likely reason for the rise of short sales is, most obviously, the state of the real estate market. Many experts feel that the market is on the rise, assuming that we have reached the lowest point we could possibly reach, and that we could only go up from here. This isn’t a guarantee, though. As time goes on, it could prove to get harder and harder for homeowners to sell their properties, so now is as good a time as any if they honestly believe that the housing market may never rebound.
Expectations of Economic Recovery
Finally, one of the biggest reasons that Las Vegas short sales are on the rise is the expectation of a recovered economy. Across the country, people are ready to see the economy pick itself up and right itself. It seems that rather than do nothing, homeowners who have realized that their home isn’t what it’s worth are ready to get out and start fresh. This way they are completely prepared and in a good place with their investment opportunities when the economy finally bounces back.
Charity Jackson is a freelance writer on behalf of Las Vegas Short Sale experts Rothwell Gornt.