Why Suffolk County NY Short Sales Could Grind to a Halt

Suffolk County NY short sales could grind to a screeching halt at the end of the year, and here's why.

Suffolk County NY Short Sales ? What Exactly Are They?

A short sale is when the bank allows a home to be sold for less than the value of the mortgage. The bank takes the loss, but that loss is generally less than a more costly foreclosure. A short sale is debt forgiveness. Debt forgiveness is taxable. This is where it gets complicated.

The government has been pushing more short sales at Fannie Mae and Freddie Mac through financial incentives, and banks are streamlining the process. Suffolk County NY short sales have been gaining so much steam, they actually surpassed sales of foreclosed properties this past spring, according to LPS Applied Analytics' Home Price Index. But all the progress that has been made could end abruptly.

In order to help the huge volume of troubled borrowers and promote more short sales, Congress passed the "Mortgage Forgiveness Debt Relief Act and Debt Cancellation" in 2007. The debt forgiveness from a short sale or a mortgage principal reduction would no longer be taxable. That act is part of many Bush era tax cuts that expire at the end of this year. Without an extension, Suffolk County NY short sales would grind to a halt, as might mortgage modifications that involve principal reduction.

So what is the possibility of congress extending the tax relief? One Hill-watcher puts it at 60-40. The Senate Finance Committee passed a package of tax extenders right before the recess, including a one year mortgage relief extension, but leadership in the House of Representatives has not figured out how it wants to handle these extenders. With the looming "fiscal cliff," tax cuts are an increasingly tough sell. This particular extension does have bipartisan support, but that doesn't always mean passage in Congress, especially around a presidential election.

With great uncertainty as to the fate of the tax relief, some say Suffolk County NY short sales could get a boost this fall. Borrowers and banks alike may rush to get in before the expiration, which could help boost overall home sales numbers. Stay tuned here, we'll keep you updated on what happens with Congress and the House on this matter that could greatly affect Suffolk County NY short sales.

Suffolk County is one of 62 counties in New York. The county is in the New York metro area. We can help you find real estate in any of these areas of Suffolk County: Babylon, Bellport, Centereach, Cold Spring Harbor, Commack, Dix Hills, Farmingdale, Farmingville, Greenlawn, Half Hollow Hills, Hauppague, Holbrook, Holtsville, Huntington, Islandia, Islip, Lake Grove, Lake Ronkonkoma, Lindenhurst, Melville, Oakdale, Patchogue, Sayville, and Smithtown. Just click the "Search for Suffolk County NY Real Estate" link at the top or bottom of this page.

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