Short Sales

Great News for Distressed Home Owners

I just heard from Ed McFerran at MBS Law that the Mortgage
Forgiveness Debt Relief Act of 2007 has been extended by Congress.  What this means is that if Congress had not extended the relief act homeowners would have to start paying income tax on the
portion of their mortgage that is forgiven in a foreclosure, short sale or a
principal reduction.  For example if a homeowner owes $400,000 on their home and it sells for $300,000 at foreclosure or a short sale they could owe income tax on the difference of $100,000, the “deficiency.”  At a 25% tax rate that could be a tax liability of $25,000. Considering that these
homeowners are already in distress and probably do not have the money to pay this tax anyway this is a "makes sense" provision of the tax code and is a benefit to distressed homeowners to help them get back on their feet.

 

If you have questions or concerns concerning how this may
affect you or anyone you know please feel free to contact me for detailed
discussion of the implications of the debt relief act.

 

Here is a copy of the e-mail from Ed McFerrin announcing
the tax relief provision.

 

CONGRESS EXTENDS FORGIVENESS OF DEBT TAX ONE MORE YEAR!!

 

This will probably be my shortest email to you this
year.  The fiscal cliff legislation is
157 pages long.  Section 202 that addresses
an issue important to those of us involved in assisting distressed homeowners:
income tax on debt forgiven.

 

At this juncture the legislation awaits the President’s
signature, but we are confident that the law that precludes certain income
taxes from those homeowners that sell their property “short” has been EXTENDED
ONE MORE YEAR until December 31, 2013. In short, most homeowners will not have
any tax to pay when they do a short sale. 

 

All of you can breathe a sigh of relief as this is really
important to those of your sellers involved in short sales who will experience
Debt Forgiveness.


Is now a good time to buy?

Ask Brian

We've heard so much about the stock market and the real estate market that we don't know if we should buy a house or not. Give us one good reason why we should take the plunge!

Ask Dolly Lenz, the most successful real estate agent in America. The other day, on a down-day in the stock market, she was interviewed on Fox Business.

First, she said that in most areas of the country, the real estate market is recovering. That means homes are probably priced about as low as they will be.

When asked who should be buying a house right now, she said it should be someone with a stable job that pays enough to afford the monthly mortgage payment. And that person would probably be someone who has been waiting for the right time to buy.

I could have told you that myself, but now you have the same advice from one of the foremost experts in America.

Lenz usually sells to a Hollywood star, a billionaire or a foreign dignitary. One of her sales in 2005was the Burnt Point mansion in Wainscott, New York. It sold for $45 million.

 

Looking for a short sale?

Right now, some attractive properties could qualify for a short sale. That means the lender agrees to sell the property for less than the amount owed on the mortgage.

The lender in these cases decides that it's better to make the short sale than to foreclose on the home, which would cost the bank or mortgage company more money in the long run.

The buyer doesn't have to feel sorry for the people who can't maintain the mortgage, because the short sale rescues them from foreclosure.

Obviously, it's a more complicated process than simply taking out a mortgage, but if you have the time and patience, the short sale could work out well for you.

And it is a good decision for both the lender and the seller.

If you're interested, I can start looking for properties that would interest you and that could be considered for a short sale.


Foreclosure Time Line

Talon Northwest Neighborhoods

 

Watch out for foreclosure scams

Posted: 20 Sep 2010 11:12 AM PDT

 I had a pretty scary conversation over the weekend with one of my Seattle area loan officers.  One of her past south end clients called to complain about a "prospective buyer" that showed up on her door step interested in making a bid on the property.  Naturally she was concerned since she hadn't received any notices in the mail.

Here's the scoop.  Late last week, someone came knocking on the past clients door and said that they were interested in buying the home at auction.  They asked the homeowner to do a walk through on the property to make sure everything was in good shape.  So they walked through the house, inspected it, said thanks and left.  The owner then called my loan officer to complain about not being notified of the pending foreclosure auction date.

So my loan officer calls her department that handles foreclosures, and sure enough the homeowner is current on their payments.  The loan officer called the owner back and told them to call the police right away.

The loan officer I spoke with mentioned that she's heard of people pretending to be from the bank as well, and needing to do an inspection before the bank puts it on the auction block.  Or they are an inspector for the auction and need to review the home before the auction date.  Regardless of the story, it's not a good idea to let someone in your home that you're not sure of. 

There are rules and time lines associated with foreclosures.  There is no reason why one should come as a surprise to any homeowner.  Here's the time line of the process, from www.usa-Foreclosure.com:

Time line Step

Days for Step

Total Days

Loan referred/file received

1

1

Trustee Sale Guarantee report ordered, NOD mailed and posted on the property 30 days before Notice of Sale

1-3

4

Trustee Sale Guarantee report received and reviewed, Substitution of Trustee prepared

30

34

Substitution of Trustee received/recorded, Notice of Sale recorded, posted and mailed 90 days prior to sale; sale date set; Warranty Deed sent to lender (HUD/VA)

1-5

39

Publication period

90

129

Publication (2 of 2) completed request bidding instructions

1-5

134

Sale held

1

135

Deed recorded

5-15

140-150

(Time line is for non-judicial foreclosures. Intervals are optimal and assumes no delays.)

For more information on Washington State Foreclosures, please visit the learning center at usa-foreclosure.com

It's unfortunate to hear these types of stories.  I'm glad to hear that nothing was taking from the home, and a police report was filed.  It could have been worse.  As always, be careful out there everyone.

 

Photo Courtesy of 05com

 

 

 


Check your data before going out on a limb

A report this week issued by an Eastside Housing Coalition stated:

"I recently discovered that of the 114 houses on the market in Sammamish, 111 are in foreclosure.  The houses in foreclosure are nearly 1% of the entire Sammamish housing stock.  I don't have the statistics for Issaquah or other neighboring communities, but I do know there are a lot of people out of work who are running through their savings and starting to feel desperate."  The context of this statement is that if no intervention is available many of these families could end up homeless.  Problem is that the data is in error.  Foreclosure is a problem but not at the level reported.  As of this writing the numbers in Sammamish are as follows:

According to King County records there are 12,720 residential properties in the city of Sammamish.  As of 3/23/2009 433 are presently for sale or in escrow.  Of these 16 are bank owned which means they were acquired by the bank in a foreclosure sale or were transferred by the owner instead of a foreclosure.  There are 42 properties that have a notice of pending foreclosure filed with King County records against them.  This means that .00330% of the housing stock is in foreclosure.  .0969% of the homes for sale are in foreclosure.

I am not sure where the data was generated in the statement from the housing coalition but it is always wise to check your sources.  We all agree that foreclosure is a significant problem but it is not as large a problem as many people think.  In negotiating a short sale for a client this morning I was pleased to learn that the bank I am dealing with has created a division entirely devoted to negotiating alternative options for borrowers to avoid foreclosure.  The bank representative said that they are actively pursuing options to help people stay in their homes.  If that is not an option they will work with the borrower to assist in a transition to helm them into alternative housing.  If you are concerned about losing your home or if you know someone who is let us know.  We can help.  Refer to last weeks article regarding who is authorized by the Department of Financial Intuitions to assist in loan modifications and short sales in Washington.

by Brian Leavitt Northstone Real Estate, Inc.

Brian Leavitt is a Licensed Real Estate Broker and a Licensed Mortgage Broker representing  Northstone Real Estate Inc and Northstone Mortgage.

Brian Serves clients within the Northwest Multiple Listing Service.

You can contact Brian directly by phone at 425-837-4700 or toll free at 800-806-3145 or by email at broker@northstone.net

Click here to see Brian's client newsletter.

Brian is licensed by the Washington State Department of Licensing and the Washington State Department of Financial Institutions License number 510-MB-19802 and is a memberr of the Seattle King County Association of Realtors and Northwest Multiple Listing Service.


Short Sale Not A Cure All

In a recent conversation with another agent I was surprised to hear him boasting how the surge in short sales is such a great opportunity for distressed sellers because it "really bails them out"  Hold on there... This is a common misconception with short sales because it isn't necessarily so.  In real estate, and especially short sales, you do not get what you deserve, you get what you negotiate.  Let's take a look at some common misconceptions.

1.  There is no such thing as a free lunch:  Although the bank may willingly cooperate with a short sale, don't be surprised if they ask the seller, their borrower, to repay the unpaid portion of the obligation.  This usually takes the form of an unsecured note.  If the seller does not pay, the lender may seek a judgment against the seller that can follow them around for as long as 20 years and could become a lien against future real estate purchased, wages, etc. 

2.  No such thing as a free lunch, continued:  Don't be surprised if the lender issues the seller a 1099 for the portion of the obligation that is not paid.  In the event the lender does not require the seller to agree to repay the unpaid portion, you can expect they will receive a 1099 reporting the forgiven debt to the IRS as income.  The seller may have an out with this one because of the debt relief act, but they need to consult a qualified tax adviser before agreeing to a short sale.

3.  A short sale is "always" better for the seller than a foreclosure:  As we see in items 1 and 2 above it is likely that the obligation will follow the seller after the sale at some level.  Not so with a foreclosure in most cases.  In a non judicial foreclosure the obligation is wiped out.  Unfortunately the sellers credit is wiped out as well.  However this is true of both short sales and foreclosures but remember, if an unpaid obligation is following the seller around for the next 20 years that WAY outlasts any negative impact of a foreclosure.

When representing a seller in any short sale or foreclosure it is imperative that you, the agent, advise your seller to seek legal counsel.  A short sale or foreclosure, for many sellers, will have the greatest legal impact on them that they may experience in their lifetimes, so it is just too important for them NOT to have legal counsel.