The California Association of Realtors (CAR) has announced their sponsorship of Senate Bill 30, a bill designed to aid underwater homeowners seeking a short sale. If passed, this bill will assist to eliminate the state income tax on these transactions. Homeowners pursuing a short sale are already facing financial difficulties, and there’s no reason they should face additional tax problems due to the housing crash.
Existing sponsors of this bill include Senators Ron Calderon, Joel Anderson, Marty Block, Lou Correa, Noreen Evans, Jean Fuller, W. Ted Lieu, Curren Price and Assembly Member Diane L. Harkey.
Since being introduced in December of 2012, the bill received its first hearing last Wednesday. CAR is currently pushing for the bill to be passed by the Appropriations Committee by Friday, to avoid a delay. An unapproved piece of legislation by Friday would stall the bill up until January.
Several reasons encompass the bills meaning, including the ongoing threat of foreclosure and the morality behind the law.
Foreclosure vs short sale
Many underwater borrowers are under the impression that short sales are a cheaper way out of delinquency. While it’s true that short sales are designed to help avoid the trap of foreclosure, many borrowers will often find it frightening and stressful to imagine paying taxes on money they’ll never see again. For some homeowners, enduring the credit wrecking foreclosure process may seem like the cheaper and less “stressful” route to take.
It’s the right thing
Not all families face foreclosure because they purchased a property above their means. Many delinquent borrowers suffer from financial hardships that force them into debt. Even with borrowers who made a mistake down the line with the decisions they made with taking out a specific mortgage, they’ll be facing credit punishment for a long time – furthering burdening them with financial troubles may be pushing a line and preventing proper debt forgiveness.
To read the Bill, you can click on this link.