President Bush signed the Mortgage Forgiveness Act into law last week.

Prior to this act, banks and lenders, if negotiating a short sale, were allowed to tax homeowners on the amount of debt negotiated and send them a form 1099.  Ultimately, what this meant to the homeowner is that the forgiven debt was treated as income.  Here’s an example:

Fred and Mary Smith had a home with a loan balance of $300,000.  Harry Investor purchased it, after negotiating a successful short sale, for for $225,000.  The lender, in the past, could have sent a form 1099 to the Smiths, and the $75,000 of debt that “magically” disappeared would have been treated as taxable income.

With this new law in effect, that $75,000 will no longer be treated as income.  At least until the end of 2009.

So what does this mean for you, as the investor?

Well first things first, I would absolutely print out a copy of this new Mortgage Forgiveness Act and take it on any appointment with me where I was meeting with a homeowner who was entertaining the possibility of a short sale.

Next, I would focus on finding as many short sale deals as possible.

Remember, that if you need help with a front end to your business, you should seriously consider becoming an official local representative.

I can tell you that in the new year, we’ll soon have a short sale component to your business that will make your life as an investor so much easier!

If you’ve been thinking about joining our team, there is no better time than the present.  The next 24 months are going to be the best time ever for investing in preforeclosures and negotiating short sales!

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