Probably not. I think the hey day of the “strategic short sale” is at least taking a breather while the future of the Mortgage Forgiveness Debt Relief Act is still being debated. However, there is still a ton of negative equity out there. And even though many are reporting housing prices trending upward, it would take a rabbit being pulled out of a hat to transform the situation of many borrowers who are more than 50% underwater into a positive equity position any time soon. And just as the lack of inventory drives buyers to bid up prices, many report that low appraisals are hindering those same bid up sales from closing. So, the upward price trend seems guaranteed to be a slow process, and some borrowers simply can’t hold on that long.

I do think short sales will be around for quite awhile. That is unless or until the negative equity goes away. Whether the number of short sales will trend up, or whether we have already seen the peak is yet to be seen. However, some borrowers who receive the proper tax advice while batting around the idea of a short sale may learn that they qualify for tax relief due to “insolvency,” so the Mortgage Forgiveness Debt Relief Act may not be their only pathway to some “relief.” And, the principal hardship reasons that cause many short sales continue nonetheless: divorce, unemployment, death of a borrower, disability, and employment transfer.

In my opinion, the biggest influence on the high number of short sales continues to be massively underwater borrowers. Whether it is a wise decision or not, I know many borrowers who would gladly gut their 401K to avoid a short sale if they were anywhere close to breaking even. However, many borrowers still cannot “afford” to avoid default when they encounter hardship. Very little has been done to address the negative equity problem and extension of the Mortgage Forgiveness Debt Relief Act will not escort that elephant out of the room. So, while some would-be “strategic short sale” sellers wait in the wings over the Mortgage Forgiveness Debt Relief Act, short sales will continue to happen due to massive negative equity and the need to sell now.

Before deciding whether to short sell your home, it is essential that you obtain legal and tax advice, and consult with an experienced local short sale agent. If you are considering a short sale of your Santa Maria, Orcutt, or Nipomo home and would like a complimentary short sale consultation, please call my office to schedule an in person meeting or a telephone consultation at (805) 938-9950.

Tni LeBlanc is an independent Real Estate Broker, Attorney, and Short Sale Agent. She is a Certified Distressed Property Expert (CDPE), Short Sale and Foreclosure Resource (SFR) and Certified HAFA Specialist (CHS) serving California’s Santa Barbara and San Luis Obispo Counties.

* Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement.

Copyright© 2012 Tni LeBlanc *Is the Heyday of the Santa Maria Short Sale Over?*