IRS and short sales less of an issue these days

Q. I wrote in a long time ago with a question about not wanting to pay income tax on my forgiven debt when I sold my house in a short sale years ago.

Just to update you, after an IRS hearing, which was surprisingly pleasant and took place over the telephone, I turned in an amended tax return with the proper form filled out. The canceled debt was no longer taxed, and my tax debt was reduced to a mere fraction of what it had been. I was able to represent myself successfully.

A. I'd forgotten all about short sales. Your note is a reminder about how much the economic picture has changed. There was a time years ago when readers wrote in with numerous questions about short sales - those that didn't yield enough to pay off the mortgage debts.

At any rate, I'm glad it worked out and pleased to hear you didn't have to pay income tax on the forgiven debt.

Q. I want to vent for a second on a subject matter I've not seen in your columns. Being the husband of a Realtor, and being an accountant and financial adviser, I've come to the conclusion that Realtors are the most disrespected professionals in the U.S., bar none. I've seen my wife show clients 20-plus properties and them not buy through her. She bought lunches and had the wear and tear of chauffeuring people around for countless hours, sometimes to no avail.

Wake up, world! These people are not on the clock, are not paid hourly and, contrary to popular belief, don't get paid that much commission on the sale of a home! After all of the shares paid to various entities, they are lucky to get much over 2 percent.

These are highly intelligent people required to take courses, licensing exams and continuing education. They work many weekends and holidays. So give them the respect they work so hard to earn.

A. First off, I'll add to your complaints by pointing out that in most real estate offices, individual associates work as what the IRS considers "independent contractors." Yes, supervising brokers are legally responsible for their agents' real estate activities and required to furnish close, personal supervision. But in most offices, agents receive no paid vacation, no health insurance, no retirement plan and no reimbursement for expenses. That's just the way the industry grew up, and most agencies remain that way.

Almost all agents, though, are in that field because they enjoy dealing with real estate, with people and with flexible (though irregular) hours.

A 9-to-5 worker who doesn't enjoy her job may keep watching the clock, impatient for closing time. Someone who doesn't like selling real estate, though, usually just quits and finds something else to do. Those who stay enjoy it.

Q. About that assumed mortgage for which "Worried Borrowers" fear not having any proof it had been paid off: No satisfaction letter/discharge document from Bank A is needed. Bank A cannot discharge that mortgage, as they had already assigned the mortgage to another lender.

I have been in the mortgage lending industry for more than 30 years and see this often in the case of refinances, where a new mortgage is also given to the new lender and then both mortgages are consolidated under a new agreement.

When a mortgage is assigned, the assignor (Bank A) is giving that lien to the assignee (Bank B) in exchange for payment in full of the outstanding principal balance (and interest and fees due), which appears to be what happened in their case. Bank A no longer has an interest in that mortgage.

A. Thanks for writing. Yes, that's what I thought - that the Worried Borrowers probably had nothing to worry about. I hesitate to give specific legal advice, though, which is why I fell back on that all-purpose "check with your lawyer."

Q. My father says we should check for lead-based paint in a house we're thinking of buying. But they don't use that anymore, right?

A. It hasn't been used in residences since 1978. If you're looking at places older than that, as a buyer you're entitled to notification about possible lead paint, a booklet on the subject and the right of 10 days to investigate before your purchase offer becomes binding. Few buyers actually choose to do that, as it happens.

• Contact Edith Lank on www.askedith.com, or 240 Hemingway Drive, Rochester NY 14620.

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