Quoted in a Sacramento Business Journal article about the possible extension of the Cancellation of Debt Forgiveness for short sales...

I was quoted in a Sacramento Business Journal article by Sanford Nax this week...the article was about the Sacramento real estate market, and specificially the subject matter of the part I was quoted for dealt with the "Cancellation of Debt Forgiveness" -- that expires at the end of 2012. You may know this as the rule that provides short sale sellers an exception from having to pay state and federal income tax on "debt forgiveness" (the difference between the mortgage amount owed vs the amount the property sells for) from a short sale. Right now there are wheels in motion to extend this beyond the end of 2012, but nothing has been solidified yet by our lawmakers. A few years ago in 2007, this provision was enacted and set to expire on December 31, 2009. It did expire, and then lawmakers acted, and it was extended through the end of 2012 a few months later in spring of 2010 -- but was retroactive to January 1, 2010.

I think lawmakers will end up extended this again, but it will happen the way it did last time -- it'll happen this spring and be retroactive to January 1, 2013. No guarantees obviously, but that is what I think will likely happen.

If the "Cancellation of Debt Forgiveness" provision were to permanently go away and weren't extended by the state and federal government, I think it will still make sense for many homeowners to do short sales. Unfortunately not all underwater homeowners will get good tax, legal, or real estate advice and won't realize the advantages of doing a short sale over letting the house go in foreclosure.

I always recommend that short sale sellers get tax advice from qualified professionals before doing a short sale. The current laws don't apply to all homeowners and all mortgage debt as it stands today. Often times homeowners are "financially insolvent" and would not be subject to the tax burden associated with the debt forgiveness anyway. Or with a CPA's assistance, homeowners can find ways to mitigate the tax consequences.

There are many other advantages to doing short sales vs allowing a house to be foreclosed. MANY short sale lenders now offer programs to compensate a homeowner to do a short sale -- up to as much as $45,000 under some circumstances, though more frequently I see $3,000 - $10,000 offered. Those incentives are not offered in a foreclosure. The credit consequences are far less devastating doing a short sale - the FICO score generally doesn't drop as much and rebounds faster. A person with a short sale on his/her credit will generally have a shorter waiting period to buy a home in the future with a short sale (0-4 years depending on credit score, downpayment, how far delinquent the payments were at the time the home was sold), vs a foreclosure (4-7 years depending on the credit score, downpayment). If the mortgage debt was refinanced, with a short sale there generally will not be any continuing liability for the forgiven debt, where after foreclosure the seller could still be liable for the remaining balance of the mortgage amount minus the value of the house at the time of foreclosure.

Sacramento Holiday Gift Giving Guide...are you giving back to our local economy and small businesses?

For the last few years in December, I have written blog posts about gift ideas from local Sacramento businesses to give to your favorite resident for Christmas, Channukah, or whatever else this holiday season. If your holiday festivities involve gift giving, there are many local Sacramento gifts you can give! Here are my top 12 gifts that will make any Sacramentan's holiday, at any age or budget:

• A 5k Run Training Program at Fleet Feet; the gift of fitness is a gift that keeps on giving! This super cool running store has a few locations in the Sacramento area (Downtown, Fair Oaks, Roseville, Davis) and offers several training programs for different levels (5k, half marathon, marathon, triathlon, etc). Their store locations offer a huge variety of fitness apparel too like shoes, synthetic socks, nutrition, etc. Estimated cost: $89+
• A membership to with the American River Parkway Foundation; another gift that keeps on giving! The parkway is one of the jewels of our Sacramento area, and the Foundation keeps it beautiful. A great cause! Estimated cost: $35/"Seed" annual membership.
• A new bike from Carmichael Cycles; they have everything from road bikes, mountain bikes, cruisers, and all the gear to make you a great rider! The staff is knowledgeable and they do on-site repairs too. Estimated cost: $500+.
• A subscription to Freeplay Magazine; it's the only Sacramento endurance sport magazine! They profile local athletes and give great fitness tips. Estimated cost: $3.50/month
• A California State University, Sacramento sweatshirt; My alma mater! Stay warm this winter while supporting our local CSUS Hornets! My CSUS sweatshirt was a Christmas gift from my mother during my freshman year...I still wear that thing even though it is totally faded and worn out...Estimated cost: $36 - $75.
• A new or used camera from Action Camera; This boutique camera store offers everything from new and refurbished camera, lenses, and more! They also do cool swap-meets for folks to sell their gear, photo contests, and "meet-up" events for photographers to take photos of neat stuff! Estimated cost: varies.
• Dinner at Mulvaney's; one of my favorite Midtown Sacramento restaurants! Neat setting, great ambiance, and amazing food. The menu is constantly evolving, so call ahead or check their website. Estimated cost per person: $50.
• A Growler of beer from Track 7 Brewing Co;  If you like craft brewed beer, and haven't discovered this place -- you need to go. Tucked away in an industrial warehouse space just south of Curtis Park at Sutterville Road and West Pacific Avenue, they brew their beer on-site...and have a tap room open to the public. They don't serve food, but there is almost always a mobile food truck in the parking lot. My personal favorite is the "Soulman Stout." Estimated cost per pint: $6.
• Massage from Elite Massage Therapy; Katie at Elite Massage Therapy in East Sacramento whips me back into shape after a long run, and she gives one heck of a theraputic massage too. Estimated cost/treatment: $75/ one hour.
• A copy of the book "NKOTB and Us", the authorized biography of the New Kids on the Block by Sacramento author Nikki Van Noy. Oh c'mon - someone you know was a New Kids on the Block fan in the 80's!? Estimated cost: $20.
• Tickets to a Sacramento Rivercats game; See the Oakland A's affiliate play at Raley Field. I'm a SF Giants fan, but I do really enjoy these games (especially when they play the SF Giant's affiliate team, the Fresno Grizzlies)...many of these players are a phone call away from the major leagues! Estimated cost/ticket: $6-30.
• A new home; Sure, I saved the best for last. Nothing says happy holidays like closing escrow on a Sacramento home...sorry if that was a little cheesy! Estimated cost: Priceless. =)

Check out my posts from previous years too -- there some great ideas there as well!
Post from 2011; Holiday Gift Ideas -- for your most beloved Sacramento Resident...
Post from 2010; Holiday Gift Ideas for your Favorite Sacramento Resident...
Post from 2009; Sacramento Holiday Gift Idea Guide
Post from 2008; Best Sacramento Christmas Gifts