And The Coming Collapse of Real Estate in Florida


While most of America is lost in delusion and while some residents of Pinellas County, Florida are just starting to come to grips with the Flood Insurance catastrophe that has decimated real estate values in the thumb sticking out directly into the Gulf of Mexico that is Pinellas County, it’s time to talk about the next horseman of the coming Florida real estate apocalypse…..our old nemesis the Mortgage Debt Relief Act of 2007.  Every year it’s the same old thing….lots of debate about whether Congress will extend the portions of a tax code that allow a homeowner to escape crippling liability when the sell their homestead property in a short sale.  And every year up until this year, I was very confident that the tax exemption would be extended yet another year.

But as everyone with their fingers on the weak pulse of this nation’s politics knows…this year is very much different.  October is historically a very dangerous and chaotic year for the nation’s financial markets and economy.  And this October is uglier than most.  Every year this nation’s financial problems get worse and every year it sure seems like we’ve passed the point of no return where there is no real solution.  Well, this year, it certainly seems like the country is running straight into a brick wall.  Which brings us back to a real big problem on the horizon….the likelihood that the Act will not be extended past January 2014.

So what should consumers do?  Be careful, and act quickly  If you have any intentions of selling….sell right away…get it closed before 2014 rolls around….

What are the chances of an extension passing?  Not at all encouraging.

From GovTrac:

Mortgage Foregiveness Tax Relief Act – Amends the Internal Revenue Code to extend through 2015 the exclusion from gross income of income attributable to the discharge of indebtedness on a principal residence.
1% chance of getting past committee.
0% chance of being enacted.



  • Anonymous Poster says:

    I disagree with the tone of this piece. I do not think this will change anything as people will have no choice but to continue to sell, tax breach or not.

    And I must say, I’m done feeling bad for people. Day after day I see people at the end of foreclosure after 2,3 4 even 5 years who have ZERO money saved. This means bad loan or not, these people are not financially responsible what so ever and could never afford to be a homeowner.

    So why should we continue to bail them out? Let’s say you wipe out $100k of liability in a short sale, and you have to pay some tax on that; the homeowner STILL comes out ahead, do they not? Why did the homeowner not set aside the money each month not paying the mortgage? They would have PLENTY of savings to pay the tax and move on with their life.

    It is devastating to people who have have not been financially responsible on bit. I think it is time that we stop bailing these people out and send the message that instead of going on vacation or buying that new TV these homeowners in foreclosure should be saving that money and encouraging financial responsibility. I cannot tell you how many clients have come across who are spending frivolously with the hundreds or thousands of dollars they are not paying monthly to the mortgage/taxes/insurance and then complain when foreclosure comes to an end and they have no money to move or modify.

    • Kp says:

      Fuck you.

    • broderick says:

      You need to back and do your homework. Not everyone who faces this issue with an underwater mortgage has been irresponsible. I worked 34 years and never had credit issues. I paid my bills I lived conservatively. I have a family of which I am now a single parent. I have custody of 3 little children. I was unfortunate to have my former employer terminate my employment unexpectedly in late 2012. No reason given on the papers. They owed me $35,000 of profit sharing. They of course screwed me out of it and didn’t pay it. It seemed pretty clear to me that was the reason I was terminated. I was the victim of a political change in the guard and they saw an opportunity to screw me out of what they owed. In conjunction with this incident my wife of 12 years succumbed to alcoholism. This affliction led me to file divorce to protect the children from her physical and mental abuse of all of us. 4 months of severance didn’t last long and for the first time in my life I was faced with no way out. The house couldn’t be refinanced because of me losing my job. The mortgage is $100,000 higher than the current market value. I had a buyer lined up since February 2012 and the mortgage company deliberately drug its feet until right now in December when there is now no way to close this short sale. I now face the uncertainty of taxation in 2014 because of all of these reasons. None of this was irresponsibility. It was misfortune and a rotten system that leaves me with few alternatives now. I have slowly rebuilt my career this year with a new company. I work 50-60 hours a week. However, it is too little too late. Why don’t you just say I deserve it and that this is fair what the government is doing. Where was the government when my unscrupulous employer screwed me over. I pioneered a program for them and this was how I was repaid. Where was the government when my poor x wife was beaten by her father and molested by an uncle when she was 8? All these injustices have consequences. I married her and knew she had these issues, but I also knew she had been the victim. I guess I am irresponsible because I took a chance to help her rise above her terrible family. In the end I couldn’t change these reasons for her alcoholism. I did the best that I knew how so that my children wouldn’t live in the terrible environment created by this disease. I don’t deserve to be kicked while I am down with a big tax while that same government used billions of our tax dollars to bail out these greedy banks that are the reason we are all in this terrible real estate market to begin with. All I can say is God have mercy on your soul for being a heartless fool with no idea what is like to be exploited and abused by a big corporation.

  • Dawn says:

    Well i would tend to agree with you about financial resposibility, however here is my situation. I and another borrower purchased a home in 2000. He ended up with a gambling problem in 2005 which resulted in a Chapter 13. He decided to vacate my home and I was left with a 1600 house payment for 3 more years until the chapter 13 plan was completed. I went out and got a second job and have been working two FT job since 2007. I completed the Chapter 13 in 2010 and had to wait a few years to get a lender to refincnace me and I found one in April 2013. Upon almost being refinanced with a low interest rate and payment, we found liens on the title that were in his name. I tried to get him to pay off these liens in the tune of 12K, but he wouldn’t do it. So here I am left with a short sale option becasue my house is under water. My payoff is 98K and homes around me are 30-70K. I feel screwed with no alternative. I have done everything i know to handle things and be financially responsiible but after working 80 hours a week for 5 years, enough is enough. I just started the short sale process and Im in fear the government will not extend the tax debt relief bill as it expires on January 1 2014. What else would you recommend I do?

  • Matt:

    I agree that it seems that the extension will not happen which is baffling to me. This will only create an entire other problem for the country as a whole… But what I don’t understand is why you say that this will collapse the market here in Florida. Whether people sell as a short sale or lose the home through foreclosure they will have to pay taxes on any portion forgiven and with the new foreclosure laws in place in the state that narrow the time lenders have to seek a deficiency I think most lenders will just forgive the debt meaning the borrowers will have to pay those taxes. Based on that a short sale is still a better option in the short and long term for people. We have been successfully short selling for homeowners all over the state for 6 years now and out of all of the crappy choices that people have when it comes to this it is the least crappiest.

  • ben buchanovich says:

    Then there simply will be a further apocalypse affecting the banks and the economy. If forgiven mortgage debt places a huge burden (fault is not an argument) there is the bankruptcy remedy. So, if the “Act” isn’t renewed/extended, then short sales will not take place, foreclosures will, and bankruptcies will be filed. There are many people who can BK 7 if they have their assets structured right.

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