Expiration? What short sales expiration?

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CHARLOTTE — The taxman cometh for short sales as of Jan. 1, but you wouldn’t know it from talking to Charlotte-area real estate agents.

Under current law, when a homeowner — as a result of short sale — cancels debt on his or her home through foreclosure or writes off what they owe, the amount cancelled is exempt from any income tax.

Even though that exemption is scheduled to end when 2012 does, Charlotte-area real estate agents say they haven’t seen anybody hustling to finish their short sale before Dec. 31.

“I don’t think people are very worried about this deadline,” said Tony Smith, broker-in-charge for Charlotte-based Wanda Smith & Associates Realty. “I think we’re all hoping the exemption will get extended.”

Smith said he’s confident that Congress will realize the effects that would result from allowing the exemption to expire and vote for an extension. But if an extension isn’t granted, he said, expect a massive reduction in short sales.

“People who were going to do a short sale might decide not to do that because they would have the taxable income,” he said. “If Congress is trying to help the housing sector at all by encouraging short sales and stopping things from going to foreclosure, they need to extend this.”

Nancy Braun, owner of Charlotte-based Showcase Realty, said she, too, hasn’t seen clients trying to speed up short sales, even though the end of the year is two months away.

Still, her company is mentioning the expiration when talking to sellers, she said.

“I think we are hoping that Congress will extend it,” she said. “We have been explaining that to underwater homeowners to hurry up and get their property listed, but it doesn’t seem to be pushing them to make them move on the short sale.”

Baxter Hayes, co-owner of Charlotte-based realty company Cottingham Chalk Hayes, said it’s a good thing that many people aren’t trying to quickly push short sales through, because “you can’t speed up your short sale even if you did want it to go faster.

“If we have a listing that is a short sale, we do have to publish that as part of it in the MLS, but we don’t get involved in what is happening in that seller’s life as they try and negotiate with the banks. All of that is part of what holds up the process.”

Sadler Barnhardt, a Cottingham Chalk Hayes broker, said the process of getting a short sale done remains “a maze” for homeowners.

“There are so many people involved,” he said. “It is like swimming in peanut butter. There are even plenty of cash buyers out there, but that makes no difference to the banks. They won’t hurry if they don’t have to.”

Kathy Morris, a broker with Huntersville-based realty firm Morris Tremblay Depew, which formed July 1,  said the exemption must be extended if there is to be any hope of the housing recovery continuing.

“Letting this expire certainly wouldn’t help the housing sector,” she said. “It definitely would cripple our residential market for short sales if this is taken away.”

BAUGHMAN can be reached at [email protected], (704) 247-2911 or on Twitter at @scottmecktimes.