Since "the crisis" began in 2007, homeowners who have gone through a real estate short sale have not had to count the invisible income on their tax returns. But the Mortgage Forgiveness Debt Relief Act of 2007 will expire on Dec. 31, 2012. Homeowners must close the deal before then or they slip into “taxable” status on Jan 1, 2013.
At least that’s the way it is for now. And until something changes, you can push forward with this information to garner more listings and be of service to your marketplace.
With just a bit over a two months left before the scheduled expiration, you might consider urging homeowners to do their short sale immediately, so they can get a deal closed before year’s end. However, be aware that deals not approved and closed by Jan 1 may be subject to taxation.
If I were a home owner considering a short sale, that might make me pause.
Considering that last March a bill was introduced in the U.S. House of Representatives to extend the Mortgage Debt Relief Act through the end of 2015, people may want to sit tight until they’re sure. I suspect we'll see fewer new short sales come on the market in November and December just for that reason.
As a real estate consultant, you are positioned to discuss this with homeowners. If they’re in an NOD status and must sell or go to foreclosure, they might be more motivated to risk short sale, even with just barely 60 days left until the deadline. On the other hand, they may simply decide it’s time to go to foreclosure rather than be faced with a sizable tax bill. They’re really caught in the middle and need help.
You can help them weigh the options, and possibly generate listings for yourself. Here's one idea for some last-minute short sale marketing:
Hit the Road for Listings
Nothing sells like urgency. You can use the pending expiration of the Act to get the attention of homeowners who are in NOD status or who need to move for other reasons. And one of my favorite approaches to getting their attention is to hit the road. Do a hard-core door-knocking real estate marketing campaign for the next two weeks.
When you do talk to homeowners who've been hit by the crisis and are under water, be sure to let them know that last March a bill was introduced in the U.S. House of Representatives to extend the Mortgage Debt Relief Act through the end of 2015. The new bill, titled "Homeowners Tax Fairness Act" requires congressional approval, which has not been given yet, but all the pundits believe it will.
Short Sale Marketing Package
Here's how you can use the current expiration to introduce yourself to homeowners and provide information that can do them real good, whether they list or not.
1. Put together a short sale marketing package
2. Put the marketing package into a Fed Ex or Post Office overnight envelop
This will ensure the package gets opened if you have to leave it at the door. When handing it to the homeowner in person, remove it from the overnight envelop and hand your real estate company folder to them.
3. Go knock on the door of the homeowners currently with NOD (notice of default) status
Knocking rather than calling on real estate leads may take a bit more guts, but you'll have vastly better results with the personal touch. You can also door-knock in general, without needing NOD status. The NOD status simply improves your odds.
4. Use a simple script
Say something like: "Hi, I'm __ with ___. Are you Mr.____? I’m on a list that notifies me when someone in my market area has been issued a Notice of Default by their lender. My job is to let you know that you have options, depending on your situation. For instance, with the Mortgage Forgiveness Debt Relief Act set to expire in December, getting a short sale started immediately may be your last chance to escape the tax consequences of a short sale. Do you have a few minutes to talk about this now or would you like to set an appointment for sometime in the next few days to go over your options and get your questions answered?"
Make sure you rehearse your speech until it's natural.
5. If there's no answer, leave the overnight package by the front door. It'll get opened
By providing useful information, you're offering help to homeowners who might otherwise not realize they have options. By engaging in a discussion with them, you can better understand their constraints and help them think of solutions to their real estate dilemma. You can be their sounding board.
At the very least, you'll be out there talking real estate to homeowners...and isn't that the best way to get listings? If the new Act is passed by congress, you can return to those homeowners who weren't ready to take action yet.
Be consistent. Be bold. Be smart. Linda Schneider is a real estate business coach for smart real estate agents who want to be more powerful in their business. Drop by RealEstateBusinessCoaching.com for more about selling skills and real estate marketing ideas to take your business to the next level.