Category Archives: Short Sales

Mortgage Forgiveness Debt Relief Act of 2007

To those who contacted me regarding the possible IRS tax ramifications regarding short sales from a seller’s perspective (and feel intimidated by the comments section for whatever reason), the Mortgage Forgiveness Debt Relief Act of 2007, a bill sponsored by Congressman Charles Rangel of New York that was recently enacted on December 20, 2007 with the intention of helping homeowners avoid foreclosure, addresses that.

The bill provides a three-year window for homeowners to sell their property and pay no taxes on any debt forgiveness allowed by the lender. For example:

Let’s say you purchased a home for $200,000 during the housing boom in 2006 and financed 100% of the purchase price with a 2-year interest only adjustable rate mortgage like most of your neighbors. However, you were recently laid off by your employer and the only job offer you received was in Fargo, North Dakota. You are now forced to sell your home because you can’t afford to pay rent plus all those jackets and boots you have to buy in order to live in Fargo, as well as the mortgage, property taxes, and insurance for your Miami home. Renting your Miami home just doesn’t make any financial sense because you’d be faced with a tremendous negative cash flow. Add insult to injury, your home is now worth only $160,000.

Your only option is to short sell your home at a price where the lender will agree to short sell or let the property go into foreclosure.

In the past, in a scenario like this one (assuming that the lender agrees to a short sale at $160,000), the IRS would have treated the amount forgiven ($40,000) as taxable income. The Mortgage Forgiveness Debt Relief Act of 2007 “amends the Internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence. Limits to $2 million the excludable amount of such indebtedness. Reduces the basis of a principal residence by the amount of discharged indebtedness excluded from gross income. Disallows an exclusion for a discharge of indebtedness on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer. Sets forth rules for determining the allowable amount of the exclusion for taxpayers with nonqualifying indebtedness and taxpayers who are insolvent.”

You can see that “principal residence” is in black bold typeface. This does not apply to second homes or investment properties.

As I discussed in a previous post, Top 3 Real Estate-Related Terms for 2008, short sales will become an everyday term in the local real estate market. The guy bagging your groceries will be compelled to ask (as he places the eggs and the bread in your shopping cart), “So, did you finally short sell your property?”. Don’t be embarrassed to answer that.

Tip him in pennies and foreign coins.

Come to think of it, you may be doing him a favor.

If you’re in a short sale situation and need help short selling your home, feel free to contact me. Short sales are complex transactions that require the professional assistance of someone who is experienced and qualified to negotiate with a lender’s Loss Mitigation Department. I can be reached at 305-491-7179 or

Adrian Salgado is a Realtor Associate with RED I Realty in Miami, FL and can be reached at 305-491-7179 or


1 Comment

Filed under Short Sales

Neo Vertika 1/1.5 Split “B” – $260,000 *Short-Sale*


Perfect opportunity for the professional working in the Central Business District, the Brickell Financial District or that person yearning for an urban lifestyle in the heart of the city.

Unobstructed views of an evolving skyline and a meandering Miami River await in this bi-level split unit in the favorable east-facing 04 line of Neo Vertika. Tasteful finishes abound in this functional split B model with 20 ft ceilings and floor-to-ceiling windows that flood the living space with an abundance of natural sunlight.


Unit features oversized white porcelain tile throughout, remodeled full and half baths, white Nolte kitchen cabinets with black granite tops & stainless steel appliances and 2 balconies with pleasant city views.




Building amenities include a lap pool, fully equipped double-height fitness center, the magnificent “V” social room, racquetball court, free valet, and 24 hour security.




Neo Vertika is a 36-story mixed-use (pet-friendly) riverfront building located at 690 SW 1 CT in the Brickell/Downtown area of Miami. The building was developed by Neo Concepts, designed by Revuelta, Vega, and Leon, built by Coastal Construction, and is managed by Miami Management, Inc.

This is a short-sale. ALL offers will be considered subject to 3rd party approval.

The current owner purchased the unit from the developer for $320,000 in July 2006 and spent thousands more remodeling baths, installing floors and lighting, and providing other finishes to make the unit home.

Call me at 305.491.7179 for more information.

Adrian Salgado is a Realtor Associate with RED I Realty in Miami and can be reached at 305.491.7179 or


Filed under Downtown Miami, Neo Vertika, Short Sales