Homeowners Face Bigger Challenges During Short Sales or Foreclosures in Utah

Watch on your mobile device >>

There can be nothing worse for a homeowner than to be in an underwater property that just has them drowning and with no apparent relief in sight. In fact, despite the influx of short sales and foreclosures across the country during the past few years, many markets have begun to improve.

In Utah, however, the harsh reality remains that almost 50% of homes on the market are distressed properties. 

Utah a Full Recourse State

As the nation continued to rifle through one of the worse housing disasters in its history, millions of Americans were faced with a very difficult choice; walk away from their underwater properties or hold on to them and hope for the best. One of the biggest challenges for people in some states is their respective states’ position on debt. In Utah, mortgages are considered full recourse debt. Banks are allowed to file with collections companies and pursue homeowners for years, if need be, to recover the amount owed on the property.

What this means to people considering short sales or facing foreclosure is that no matter what the reason behind the debt – whether a national housing crisis, personal loss or anything else – the lender has the exclusive legal right to pursue the full deficiency.

Homeowners Have Alternatives

In some cases, owners of a property that has gone underwater may be able to utilize opportunities available through the HAFA program. Keep in mind that banks can report a loss to the IRS, resulting in a 1099 that must be filed on the homeowners’ part. With a sizable deficiency judgment amount, the taxable amount can help to push the homeowner along to the next tax bracket, forcing a double dip hit on their so-called income. In this scenario, it may be that pursuing other alternatives is the best way to go. With the HAFA program, when a short sale has been successfully negotiated there is often no need for 1099 reporting. Furthermore, the Mortgage Forgiveness Debt Relief Act is currently in effect until December 31, 2012. Under this program, homeowners that have undergone qualified short sales are able to apply for tax exemption of up to $2M. One condition of this act is that the home is the property owner’s primary residence.
~
Despite this unnerving news, many homeowners have no choice but to consider a short sale. If you find that there are not other alternatives, or if you need to explore the options and weigh your choices, contact us today. We will assist you as we have countless others, in coming up with the best choice for you.