At long last the state of California has decided to have their consideration of phantom income received from a short sale mirror more closely the Federal handling of this type of income. Will this be a good thing or bad thing? This along with temporary federal tax waivers and the government making a concerted effort to set regulatory policy that encourages loan servicers to accelerate the short sale process seems like the Government feels like a short sale while almost equally as financially devastating for a financial institution is a more politically acceptable way of dealing with homeowners who can't afford their mortgage payments (as opposed to foreclosures). As someone who has closed quite a few short sales in Los Angeles and plans to continue to do so this seems like it will definitely give people a more dignified way of handling a Real Estate Market whose value has disintegrated.
What I feel the government could do to spur the Real Estate Industry and overall economy in turn much more than the Federal/State tax credit ever will is to allow all the people that have done short sales re-enter the market. Give them the same downpayment options as people without short sales on their credit and just add a .75-1.5 onto their interest rates.
What are your thoughts on state level tax relief for CA home sellers after short sales?
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