Foreclosure Dump Blog

Buying Government Foreclosures or Bank Foreclosures: Basics

Wed, 01 Sep 2010 15:12:00 GMT

Foreclosed homes are regularly set on the market by the two major home lenders: government agencies and banks. Be they government foreclosures or bank foreclosures, what matters most is that they can be purchased at expenses lower than their real market value. This is why homebuyers or investors generally are in haste as soon as a reliable foreclosure opportunity is listed. After having investigated the real estate market and its potentialities, homebuyers must move quickly if they want to grasp this temporary chance. In what follows we will see some of the basics and advantages of opting either for government foreclosures or for bank foreclosures.

The most popular government agencies that frequently market foreclosure properties are as follows:
1) the U.S. Department of Housing and Urban Development (you are probably already familiar with HUD foreclosed homes);
2) the U.S. Department of Veteran Affairs (for the well-known VA foreclosures); 3) local agencies of taxation;
4) the Federal Deposit Insurance Corporation (FDIC – the department dealing with foreclosure sales);
5) the Internal Revenue Service (IRS – once again the segment dealing with foreclosures).
However, the market of government foreclosures is led by HUD foreclosures and VA foreclosures.

In any case, the point is that with government foreclosures one of the above mentioned government agencies is holder of the property’s title. As a rule, they will place any foreclosed property at auction. The buyer’s advantages are basically drawn from bidding opportunities generated by auction circumstances: the potential buyer’s chance to set a limit for the house value, the certainty over the time interval spent to acquire a property, the possibility to evade prolonged negotiations with the former homeowner. As with any auction, government foreclosures are purchased if the bidder’s offer is appropriate. Also, your involvement in government foreclosures auctions needs to be mediated by a certified real estate agent who is regularly rewarded a 6% bonus for having successfully sold the property. The real estate agent’s indemnity is an additional figure to the sum you place as a bid.

To what concerns bank foreclosures, there are three major ways of purchasing such properties. One of them is in pre-foreclosures. In this case, you will need to act promptly, because there is actually very little time up until a property in a pre-foreclosed stage is transferred to foreclosure terms. So before properties actually become bank foreclosures, the active, smart homebuyer/investor – who has previously undergone a serious investigation of an area’s real estate market – will know to move in the direction of negotiating directly with the distressed homeowners. If pre-foreclosure attempts fail, the next step is an auction.

With bank foreclosures, the auction is required by the banks whose lends haven’t been acquitted on time. In such circumstances, the homebuyer/investor could try to overpass the bank’s bidding offers. Yes, the bank will also bid in such auctions, interested in stepping further along the process of profitably selling foreclosures. If the auction is won by the bank, the property becomes an REO (real estate owned) foreclosure property. This is the third way in which you could purchase bank foreclosures. When you are interested in REOs, you will negotiate directly with the bank. The main advantage of the potential homebuyer/home investor is that this is the most certain manner (and one of the fastest) of acquiring a foreclosed property. You will need to make an offer, but be careful: the offer should be commonsensical, don’t expect a bank to accept a discount of 50%, even if we are talking about foreclosures. Most often, you will get a 10%-20% lower price for an REO foreclosure.

In the end, the key toward purchasing foreclosures, no matter the entity selling them, is given by two stages:
careful real estate market investigation and promptness in action when the time comes to place your offer.
Remember that the market of foreclosures, no matter how advantageous, is highly competitive, since many homebuyers/investors are interested in it.

About the author: The above Real Estate information on Buying Government Foreclosures or Bank Foreclosures: Basics was provided by William Henderson, a Florida Licensed Real Estate Agent with over 15 years in the Banking, Finance and Real Estate related fields. William can be reached by email at whenderson586@gmail.com or by phone at 786-346-5611. You can also check the website http://www.foreclosuredump.com for up to date properties for sale in your area.

Thinking of short selling your home? I can help get the process done!

I service the following area of Miami Dade County: Miami Beach, Brickell Area, Downtown Area, North Bay Village, Normandy Isle, Surfside, Sunny Isles.

Best Places to Find a Foreclosure Bargain

Tue, 31 Aug 2010 14:03:00 GMT

IRVINE, CA--(Marketwire - August 31, 2010) - With a number of real estate markets still reeling in the midst of the nation's economic crisis, bargains persist for savvy investors looking to add to their portfolios of rental properties. Prices have even gone low enough in some markets for so-called flippers to purchase, rehabilitate and resell properties in the short term.

"As the national economy continues to laboriously work its way back to prosperity in an uncertain future, the dynamics of local real estate markets continue to offer opportunities for investors to purchase properties at exceptional discounts," said James Saccacio, chief executive officer of RealtyTrac. "The old saying that there's no better time than the present has never been truer than it is today."

Based on data from National Association of Realtors (NAR) and Bureau of Labor Statistics (BLS), a number of the nation's metro areas stand out due to available discounts on purchasing distressed properties and other factors. The five listed below in particular were selected because they offer an average sales price discount of at least 35 percent on foreclosure purchases, positive year-over-year growth in median home prices and relatively low unemployment rates compared to state and national averages.

#1 Memphis, TN Consisting of Fayette, Shelby and Tipton counties in Tennessee, along with adjacent Crittenden County, Arkansas, and De Soto, Marshall, Tate and Tunica counties in Missouri, the Memphis metropolitan statistical area (MSA) had an estimated population of 1.3 million people as of July 2009, according to the U.S. Census bureau.

More than 3,000 properties sold in the MSA during the first quarter of 2010, with 37 percent of those being foreclosure properties, selling at an average discount of nearly 53 percent, according to RealtyTrac.

On a year-over-year basis, unemployment was up one point in March to slightly above the national average at 10.6 percent, according to the BLS. Despite the unemployment numbers, however, home prices increased 18.5 percent, with the average foreclosure selling for $72,904 during the quarter.

#2 Milwaukee-Waukesha-West Allis, WI
Milwaukee, Ozaukee, Washington and Waukesha counties make up this metropolitan area, home to an estimated 1.56 million people in 2009.

In total, more than 2,200 properties sold during the quarter, with 22 percent of those being foreclosure properties selling at an average savings of nearly 48 percent. The March unemployment rate was below the national average at 9.8 percent, a slight uptick of less than one point from March 2009.

Metro home prices rose during the quarter by 6.8 percent from the previous year, with the average foreclosure property selling for $89,839 during the first quarter.

#3 Buffalo-Niagara Falls, NY
Erie and Niagara counties make up this MSA, which more than 1.1 million people called home in 2009.

Although only 8 percent of the MSA's total 800 properties sold were foreclosures during the first quarter, they sold at a discount of more than 47 percent. Unemployment in the MSA was well below the national average at 8.6 percent in March, a slight downturn from a year ago.

Another positive factor was the metro's median home price, which rose 7.5 percent during the quarter from the previous year. Foreclosure properties there sold during the quarter for an average price of $57,191.

#4 Cleveland-Elyria-Mentor, OH
One of the poster children for what went wrong when the real estate market crashed and foreclosures took off in 2007, Cleveland and its surrounding area is making a comeback of sorts.

"Ohio is a good area. A very high-tech environment and strong education and university system," said Dr. Jay Butler, director of Realty Studies, Morrison School of Management and Agribusiness at Arizona State University.

Home to an estimated 2.1 million people in 2009, the Cleveland MSA is made up of Cuyahoga, Geauga, Lake, Lorain and Medina counties.

Almost 1,000 properties sold during the first quarter, 26 percent of which were foreclosures selling at an average discount of more than 45 percent. Unemployment was virtually on par with the national average in March at 9.8 percent, up marginally from the same month last year.

"I think a lot of people get down on places like Cleveland and Detroit," Butler said. "They're overlooking those places. The focus has been on Detroit, but the rest of Michigan is in pretty good shape. Also Mississippi and Georgia, where plants got shuttered, they are now opening. The auto industry is bouncing back."

Home prices were the big story in Cleveland during the first quarter of the year as they grew 53.8 percent from the first quarter of 2009. The average foreclosure property sold for $71,438 during the quarter.

"If you want to buy and hold for cash flow, then the Midwest -- Cleveland, etc. -- is the place you can buy for $30,000," said Phyllis Rockower, founder and president of the Real Estate Investors Club of Los Angeles.

#5 San Francisco-Oakland-Fremont, CA
With 4.3 million residents, this metro area has high California prices, but with big enough discount to justify serious consideration from investors looking for an in-demand market with rock-solid long term prospects.

A good portion of Northern California comprises this metro area, consisting of Alameda, Contra Costa, Marin, San Francisco and San Mateo counties, some of which are "rebounding pretty well," according to James Gaines, research economist for the Real Estate Center at Texas A&M University.

Forty-five percent of all first quarter home sales in the metro area were foreclosure properties. Selling at a discount of 41 percent, the average foreclosure sold for $327,262.

"When I first started teaching five years ago I did a lot of workshops in California," said real estate investor and trainer Andy Heller. "Of the active investors living in California, I would estimate that 70 percent were investing out of state. I've been doing a lot of workshops in California the last year, and I would estimate that now the active investors have totally flipped. Now they're investing in-state. They didn't before because they felt the numbers couldn't work. Now they do."

Like all of California, unemployment was up in March in the San Francisco, where joblessness was up almost two points from March 2009 to 11 percent. However, the median home price rose substantially, up 28.9 percent from the first quarter of 2009 to the first quarter of 2010.

Stop Making Mortgage Payments During a Short Sale

Mon, 30 Aug 2010 21:42:00 GMT

There are a lot of myths floating around when it comes to successfully doing a Real Estate short sale. One of the more prominent untruths is the fact that you need to be in default with your lender in order to do a short sale.

On numerous occasions both online and around the water cooler in the office, I have heard other Realtors telling their clients that they need to be behind in their mortgage payments in order to complete a short sale. This is flat out WRONG and could have negative consequences for the seller if they listen to that advice.

One of the most difficult questions a client or customer can ask me is whether or not they should stop making mortgage payments. While I am well versed in short sales, a lawyer I am not and therefore should not be handing out legal advice. When I am asked this question more often than not I will have them speak with the lawyer I work with on all of my short sales.

If you are thinking you may need to do a short sale here are some things to consider regarding whether or not it makes sense for you to make mortgage payments or not:

Reasons to Stop Making Your Mortgage Payments During a Short Sale:

Although you do not need to be in default in order to do a short sale most lenders will act quicker on a file that is delinquent. It makes perfect sense. Why would a bank give priority to someone who is current on their loan?

Some sellers just don’t have a choice, as financial hardship has forced them to put all their money towards essentials such a food and heat.

The money being put toward the mortgage could be going towards building savings to be able to pay future rent and other living expenses instead.

Lenders may be less inclined to go after a seller if they are not making mortgage payments. It is obviously difficult to get blood out of a stone and some banks may not want to expend the energy chasing down a deficiency.

Biggest Drawbacks of Going Into Default:

There will be an impact to your credit score. Whether you go through a short sale or let the home go to foreclosure there will be an impact on your credit. Every circumstance is different but speaking in generalities your credit score could take a whack of around 200-300 points in a foreclosure.

A short sale has the potential to be around the same, although I have seen in quite a few circumstances where the drop was closer to 100 points.

You will not be able to buy another home for two years. For a Fannie Mae backed loan you will more than likely not be able to get a loan for two years.

End up in foreclosure. If you are not making payments during the short sale process and the bank rejects the sale you could end up losing the home to foreclosure. This obviously would be the case anyways if you did not have the ability to pay the mortgage.

The case for making mortgage payments during a short sale:

If you can financially afford to make your mortgage payments in a short sale, you may want to for the following reasons:

You more than likely will be able to get an FHA loan if you were not late on any of your mortgage payments. According to Fannie Mae guidelines issued in August of 2008, you are also supposed to be able to get a conventional loan if you do not have to pay back the lender the “short fall” and did not become delinquent during the short sale. While this is supposed to be the case most lenders say otherwise.

Making your payments does help protect your credit to some extent although the lender can still report your short sale which will effect your FICO score. This is recognized as Credit Score Factor Code #22.

If the home does not sell or the bank rejects the short sale you will still be current and not in jeopardy of losing the home.

If you have not fallen behind in your mortgage payments it may make the whole process easier to cope with emotionally. There are many that get worked up from the fact that they are failing to payback an obligation they signed up for.

About the author: The above Real Estate information on Stop Making Mortgage Payments During a Short Sale was provided by William Henderson, a Florida Licensed Real Estate Agent with over 15 years in the Banking, Finance and Real Estate related fields. William can be reached by email at whenderson586@gmail.com or by phone at 786-346-5611. You can also check the website http://www.foreclosuredump.com for up to date properties for sale in your area.

Thinking of short selling your home? I can help get the process done!

I service the following area of Miami Dade County: Miami Beach, Brickell Area, Downtown Area, North Bay Village, Normandy Isle, Surfside, Sunny Isles.

Is the reducing foreclosure rate a ray of false hope?

Mon, 30 Aug 2010 19:35:00 GMT

* Foreclosures topped-out at the end of 2009
* One months past due are on the rise again
* Are these structural anomalies, or signs of worse to come?

Optimistic American commentators may have been correct in stating that foreclosures topped out finally in the first half of the current year. Notwithstanding that, recent declines in property markets coupled to the generally weak state of the national economy suggest that these gains might be transitory. The number of loans in the repossession pipeline dropped during the period January to June 2010 (the first time since 2006) and other delinquency indicators improved as well, according to a Mortgage Bankers Association report released Thursday.

Chief Economist of the Association Jay Brinkman warned that optimism was premature. “It’s more of a hope than anything at this point,” he cautioned. Now that most of the troubled high-interest sub-prime loans have worked through, the respected economist’s concerns have shifted to prime loans where many delinquencies are the result of unemployment. “It takes a paycheck to make a mortgage payment,” he commented wryly.

The drop in the monthly rate of foreclosures during the second quarter of 2010 was relatively light – 9.11% compared to 9.54% in the previous quarter (and 9.6% in the last quarter of 2009, which was the peak). The rate of loans that moved to final repossession was also lower. This flash of light across a gloomy economic landscape comes at a time when news of sales remains bleak. Pre-owned home sales retreated 26% in July year-on-year, and the corresponding figure for new homes was even worse at 32%. This is the worst month ever for July home sales recorded, and far worse than the pundits had predicted.

A leading economist regards the situation as critical and its implications significant. “Up to four million households could still lose their home,” he is on record as saying. “Aside from the considerable social costs, this does not bode well for consumer spending, bank profits or the housing market itself.”

The percentage of homeowners one month past due appears to be on the rise again, and reached 3.51% in the second quarter of 2010 compared the 3.31% prevailing at the end of 2009. The analyst is warning that the reduction in the number of properties going through foreclosure is a reflection of the determination of banks to clear backlogs, as opposed to a promise of fewer in the pipeline in the future. Evidence of this lies in the fact that almost 280,000 American homes were foreclosed upon in July this year, compared to approximately 225,000 in June.

Every foreclosure causes at least one other American family to lose hope. Are these high numbers going to spur another round of strategic defaults? We shall have to wait and see what happens to the volume of foreclosed houses, apartments, and condominiums listed at www.foreclosuredump.com.

Foreclosures fall but new delinquencies up

Fri, 27 Aug 2010 13:06:00 GMT

By Al Yoon

NEW YORK | Thu Aug 26, 2010 3:02pm EDT

(Reuters) - The number of U.S. homes headed for foreclosure fell during the second quarter, marking the first such drop since the housing slump began in 2006, but the improvement may be fleeting as the number of newly delinquent homeowners rose, a banking group said on Wednesday.

The percentage of loans in the foreclosure process declined last quarter to 4.57 percent from 4.63 percent in the first quarter, partly because of lender efforts to ease payments for homeowners and the impact of temporary home purchase tax credits, the Mortgage Bankers Association said in a report.

Foreclosures could head higher in coming months, however, as the percentage of borrowers at least one payment behind resumed its rise after easing late last year, the MBA said in a report that covers more than 85 percent of the market.

The pipeline of delinquencies and huge rise in properties on balance sheets of financial institutions last quarter has aggravated concerns that the critically important housing sector will drag the U.S. economy back into recession.

Foreclosures have also taken a toll on consumer confidence and are steering buyers away from the market as they expect the supply to pressure prices still lower. The "shadow inventory" of homes likely headed to market is about 4.5 million, Michael Fratantoni, vice president for single-family research and policy development at the MBA, said on a conference call.

"On the surface, there is good news on the foreclosure front, but not on short-term delinquencies," said MBA Chief Economist Jay Brinkmann. "There's a little pause. It could be short-term factors instead of a trend."

The number of loans 30 days past due, at 3.51 percent last quarter versus 3.45 percent in the first, show a correlation with the recent rise in unemployment benefit claims, he said.

Three Common Questions about Foreclosures and Mortgage Late Payments

Fri, 27 Aug 2010 13:22:00 GMT

Submitted by: CA Hagy
With today’s economy in a downward spiral, it isn’t uncommon for mortgage borrowers to have late payments or even missed payments on their home. Some times, these missed payments can be worked out with the mortgage lender. However, depending on the circumstances, it could result in a foreclosure. Here are some common questions that today’s homeowner has about missing payments and foreclosing on their homes. Hopefully, the answers will clear things up and relieve some worry.

What are my options if I am late on a mortgage payment?

At the first inclination that you may miss a mortgage payment, contact your lender. They are more willing to work with you favorably if you alert them beforehand that you are going to be late. Once you become 30 days late on your mortgage payment, you will receive a notice in the mail. You will get another notice if you are 60 days late. The worst thing you can do, however, is ignore the lender. During these times when so many people are just walking away from their mortgage, lenders are willing to work with more people if the borrowers show an interest in working with them.

How do I know if I’m eligible for a mortgage modification?

Mortgage modifications are becoming more popular as banks are trying to keep borrowers from simply walking away from their loans. A modification often includes a reduction in the principle balance, the interest rates or an extension of the loan to reduce the monthly payments while stretching them for a longer period of time. If you are having problems making your payments, a loan modification is often up to the lender. Fortunately, the federal government is pushing loan modifications lately and mortgage lenders are as well to encourage people to stay in their homes. Modifications often require mortgage counseling, too. however, if you do not qualify for a modification then you can quite possibly qualify for a HAFA Short Sale. This is a Short Sale in which you can wipe away all debts with no Deficiency Judgement.

Are banks foreclosing on homes as quickly as they used to?

A recent story shows that a large percentage of borrowers who are 60 days late on their mortgage payments are not being turned over to their lender’s loss mitigation departments. Because of those figures, it does seem like banks are not as quick to foreclose as they once were. If they foreclose on you, they are stuck with a foreclosed home that probably needs repairs before it will sell. They will likely have to sell it at a discount, too. It rarely works in the bank’s best interest to forecloey se on your home so they are giving borrowers more chances these days. They will work with you to a point but they do want to see you working with them. If they do not see cooperation from the deliquent borrower then they will Foreclose on your property very quickly so they can recoup their loss.

Buying a Florida Bank Owned Home

Wed, 11 Aug 2010 19:49:00 GMT

There are a few different ways in which a buyer of Real Estate could obtain ownership of a foreclosure. Here is a quick summary of the three possible scenarios:

1) A pre-foreclosure where you are able to buy directly from the home owner before the bank takes over. This is commonly referred to as a short sale.
2) At an auction where you may be in competition with other buyers bidding on the home.
3) From a Real Estate company or the bank itself. This is known as an REO transaction a.k.a (Real Estate owned).

Below is everything you need to consider about buying a bank owned home after a foreclosure.

The opportunity to buy a Florida bank owned home is one that many buyers often consider due to the fact that there is a prevailing belief that you are able to purchase one for 50 cents on the dollar or less. More often than not many bank owned properties do represent a decent Real Estate value and sometimes a great deal! Do not expect to buy one for half off the market value though. You can sometimes but not always pay 5-20% less than the going rate for a similar comparable property.

Buying a foreclosed home however, is not for the timid at heart and there are many things that buyers need to be aware of going into a REO transaction.

Like any other transaction, you should investigate the present market value of the property. Do not blindly assume the list price is a fantastic deal. This is something a skilled local buyer’s agent can do to assist you.

A Realtor that knows the local inventory and recent sales data should be hired to help you with the transaction. While a banks goal is to get rid of their inventory as fast as they can, don’t expect the bank to consider silly low ball offers especially during the first few weeks the property is listed for sale.

In my experience while working as a Florida Realtor, I have never seen a bank accept an offer less than 10% under the asking price. In many cases the asking price has already been set aggressively to start. Like any seller, the banks goal is to maximize the price they get for a property.

What many buyers fail to understand is that banks have to demonstrate to shareholders, investors and auditors that they attempted to get the highest price possible.

After a home has been in the banks inventory for a while they do tend to become more aggressive with the price. A bank after all is not interested in being a home owner. Do not make the poor assumption however, that banks are desperate sellers and will do anything to clear out their inventory. This is rarely the case!

In order for a bank to consider accepting your offer you want to make sure you have been pre-approved by a lender. Most banks will not even consider your offer without proper financial documentation. If you happen to be making a cash offer with no financing contingency, the bank will want to see proof that you have the funds to purchase in an account somewhere.

Some banks may also ask you to get pre-approved through them as well, although it can not be a requirement to do so due to RESPA laws. RESPA stands for Real Estate Settlement Procedures Act and is designed to protect consumers.

Often times with a bank owned property you will need to have patients of a saint. In many cases the bank will take days to respond to your offer. Also remember that on weekends banks do not conduct business. The process can take even longer if you find yourself competing with multiple offers on the property.

When you buy a bank owned property be prepared to be buying it “AS IS”. Most banks will not make repairs to a property unless it would effect the buyers ability to finance the property. Some of the things that a bank may consider remedying could include:

* Termite or other insect problems.
* Mold issues.
* Plumbing or heating system issues.
* Electrical issues especially if it involves a safety hazard.
* Septic systems ~ some states require a passing inspection in order to close, including Florida. See Florida Title V
* Structural issues.

On many occasions I have seen banks not even consider fixing these types of issues. Every bank is different in how they operate and make decisions. Do not expect a bank to make small repairs. You may be able to possibly get a credit for some repairs at closing but do not expect it.

Most banks have their own contracts that they use. You will be expected to sign their standard form and in most cases you will not be able to make any changes to it! I have seen attorneys try and more often than not they are rebuffed.

In Florida the FAR BAR AS IS CONTRACT with all the addendums that should go along with the contract are submitted to the bank for review. All offers should be placed at the highest and best offer as there may be multiple offers on the property and there will be no negotiating with the bank unless your conteract is the one that is picked by the bank.

In most circumstances you will be given the opportunity to conduct inspections even though the property is being sold “as is”.

It is crucial that your Realtor makes sure that you have proper contingencies in place to inspect the property for such things as the structure, pests, mold, radon , water, and others.

You will want the right to terminate the contract if these do not meet local or national standards. Be aware that the bank is going to want these inspections to be done immediately and not the typical 7-10 day period of a standard sale.

Lastly, banks will prefer that the closing will take place quickly. You will not see the same flexibility that you could possibly get with some traditional home sellers. As a rule of thumb, most banks will want the closing to take place in 6 weeks or less.

One really important clause that you find in many bank owned contracts is the penalty if you do not close according to the stated contract date. In most cases there is a $100 dollar a day penalty for not closing on time! You better make sure your ducks are in order when buying a bank owned home.

There is no question that some bank owned properties can be exceptional values. Don’t overlook the fact that there is quite a bit to think about going in though. Having Real Estate professionals in your corner who can guide you and protect your interests is very important. I always recommend to my buyer clients that they use a good Real Estate attorney, especially when buying a bank owned home.

About the author: The above Real Estate information on understanding Short Sale Transactions was provided by William Henderson, a Florida Licensed Real Estate Agent with over 15 years in the Banking, Finance and Real Estate related fields. William can be reached by email at whenderson586@gmail.com or by phone at 786-346-5611.

Thinking of Short Selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following areas of Miami Dade County: Miami Beach, Brickell Area, Downtown Area, North Bay Village, Normandy Isle, Surfside, Sunny Isles.

Need a South Florida Short Sale Realtor? Don’t turn into Realtor Roadkill!

Mon, 09 Aug 2010 16:11:00 GMT

One of the biggest mistake that is being made over and over again by those that need to short sell their South Florida home is picking the wrong Real Estate agent to work with.

Don’t make this mistake and turn into Realtor road kill!

The are an abundance of Realtors that are listing short sales and don’t know the 1st thing about what they are doing! Who suffers the most from this? YOU…the seller!!

When you need to do a short sale on your home it is not like selling your home in a traditional fashion. The Realtor you choose to work with can have far reaching consequences for you. If you don’t get the short sale right you are more than likely going to end up in FORECLOSURE. The very thing that you are trying to avoid at all costs can often times be the direct result of a Realtor that has no business representing you.

Working as a South Florida Realtor, I constantly see things being done that just make me furious when it comes to short sales. Below are some examples of things that Real Estate agents are doing that very well could spoil any chance of getting a short sale approval:

Presenting Multiple Unsigned Offers to the Bank
This is by far one of the biggest problems I have seen. When you are doing a short sale you DO NOT send multiple unsigned offers to a lender. Inexperienced Realtors who don’t work with shorts sales routinely make this mistake. A short sale is NOT a foreclosure and should not be treated as such. As the seller you still own the property and still make all the decisions on your property.

As the home owner of record, you see the process all the way through to the closing just like any other transaction. The lenders function is to approve or not the contract you are providing them.

When you don’t sign a contract you don’t have a buyer! Lets say your home is on the market and you get 3 offers. They all look pretty decent and your Realtor submits all of them to the bank unsigned. If you have done any research on short sales you probably know that they can take quite a long time for approval. As crazy as it sounds, there are some cases where short sales are taking between 6 months to a year to get approved. On average the time for approval is around 4 months.

How many buyers do you think get frustrated and walk after a few months of waiting? The answer is A LOT!! When you don’t have a signed contract there is no consequences for a buyer walking. It is say la vie and you have just wasted an enormous amount of time. Enough time that perhaps the foreclosure proceedings could be at your door step!

When I am representing a seller in a short sale it is a REQUIREMENT that the buyers waits for at least 90 days for short sale approval.

When you have multiple offers, it is just like any other transaction. You pick one offer and go with it. As a seller you should be picking the offer that has the greatest chance of getting approved. Along with the price and all the rest of the terms, you need to know the buyer is committed to your home and is willing to see the short sale process to conclusion. In addition, the bank is looking to work with an offer that makes sense. Their function is not to become the judge and jury for a Real Estate transaction.

Having a Seller Sign an Offer That Has No Chance of Being Approved

This is the 2nd problem I have seen and one that I also run into quite a bit. This is just the opposite of submitting all the offers to the bank unsigned. While this has happened recently while I was working as a buyers agent, I am going to relay a story about a buyer who is not my client but called me for advice because he has read a number of short sale articles I have written.

This gentleman was interested in purchasing a short sale in the Miami area that was listed for a little over $400,000. He told me he did his research and felt the home was worth close to the asking price. He met the listing agent at an open house, liked the property and thought about it for a few days. He called back a few days later and told the agent he wanted to make an offer for $400,000.

The agent told him “I am sorry but someone put in an offer yesterday and the owner accepted it”. The buyer asked the agent what the offer was that the seller accepted. She told him $300,000! On so many levels this Realtor is a complete moron. As anyone in the business knows, it is a violation of the code of ethics to reveal what a seller has accepted for an offer on a property. Beyond the fact that the Realtor does not follow the code of ethics, this short sale is more than likely going to be flat out rejected by the lender.

This guy told me that the seller said to his agent “the 1st offer is almost always the best so I think we should take it”. The home was on the market for ONE DAY! A Realtor that knows what they were doing would have told the seller he can not accept this offer because it will not be approved by the bank.

When lenders are evaluating whether to approve a short sale or not one of the steps they take is to send out an appraiser to verify the value of the home. The accepted sale price needs to be within the ball park of the market value. In the above scenario what you can expect is a SHORT SALE rejection.

It is such a shame because this buyer wanted the home and was willing to pay 100,000 more than what was accepted.

If this Realtor had done their job there would be one less seller that may not end up in foreclosure. Sadly, there will probably be another short sale that will never make it to the closing table because of pure stupidity. This is not some random story. This kind of thing goes on all the time in Real Estate.

Don’t let the joke be on you! Do your research on selecting a short sale agent to work with. They should have experience closing short sales and have a complete understanding of the process.

Thinking of selling a short sale home or condo in Miami Dade County: Miami Beach, Brickell Area, Downtown Area, North Bay Village, Normandy Isle, Surfside, Sunny Isles?

Get in touch I would love to interview for the chance to represent your best interests. I am successfully completing short sales throughout the entire South Florida area. So far, knock on wood, I have a 100% success rate for short sale approval.

Short Sale Tax Consequences

Fri, 06 Aug 2010 18:46:00 GMT

As a Florida Realtor that has been doing quite a few successful short sales, one of the things I like to make sure of when I meet a potential client that is looking to do a short sale is to give them a complete understanding of how the Short Sale process will work.

Short sales can be complicated transactions. Anyone who regularly participates in short sales knows that almost every single transaction is different. Every lender has their own set of rules on how they go about completing a short sale.

One of the things in particular that I feel is extremely important to educate a seller doing a short sale is the tax consequences. There are different sets of rules regarding short sale tax liability depending on whether or not the home was a primary residence or not.

If you are selling your primary residence as a short sale, The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt. The debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a short sale or foreclosure, qualifies for the relief granted.

The Mortgage Debt Relief Act applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion or $1 million if married but filing separately. The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition. This act was put in place for the specific purpose of helping home owners avoid the financial hardship caused by doing a short sale.

Prior to this relief act being put in place the IRS would treat the forgiveness of a debt as taxable income. The logic behind this is when you take out a mortgage there as an assumed obligation that you will be paying it back. When money is borrowed, the borrower is not required to include the loan proceeds as income because the borrower has to pay back the loan. When the obligation to pay back the loan is removed, the amount of the proceeds the buyer received becomes reportable as income because there is no longer an obligation to repay.

When there is a cancellation of debt, the lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. Eligible home owners also must complete IRS form 982 which must be included with the Federal tax return to claim the mortgage relief.

If you are selling a property and it is not your principle residence you will be paying taxes on the short sale deficiency that is forgiven!

This is obviously a key consideration when determining whether doing a short sale is the right move or not. Debts forgiven that do not fall under the debt relief act include rental properties, business properties, 2nd homes and car loans. Credit cards also do not apply unless you were insolvent just prior to the cancellation of debt.

The most common situations when the cancellation of debt income is NOT taxable include:

* Qualified principal residence indebtedness: This is the exception created by The Mortgage Debt Relief Act of 2007 and applies to most homeowners.
* Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
* Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total liabilities exceed the fair market value of your total assets.
* Certain farm debts: If you incurred the debt for the purpose of running a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
* Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. In other words the lender is not allowed to pursue you personally in case of a default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.

Whenever I am dealing with a short sale and there are tax questions, I always recommend speaking to a qualified tax professional or attorney who is well versed in these matters.

One of the other things I would pay careful attention to is getting your Florida short sale debt discharged. There are a lot of Realtors who are doing short sales and do not have a clue about debt release. You do not want to get caught with your pants down on this! Having a collection agency chase you for unpaid debts is probably not a pleasant experience!

Thinking of short selling your home? I can help get the process done!

I service the following area of Miami Dade County: Miami Beach, Brickell Area, Downtown Area, North Bay Village, Normandy Isle, Surfside, Sunny Isles.

Housing Markets That Will Be Strongest by 2014

Fri, 06 Aug 2010 14:18:00 GMT

By Venessa Wong, Bloomberg Businessweek

Aug 4, 2010

A housing market rebound seems tenuous following the expiration of the home buyer tax credit, and consumer confidence remains weak due to lackluster employment, but David Stiff, chief economist at Fiserv, says the bottom is near. Home prices in the U.S. have declined 29.5 percent over the past four years, according to the Fiserv Case-Shiller Indexes. Stiff says prices should form a trough early next year, when median prices will be down an estimated 32.9 percent from the 2006 peak.

By early 2014, they will have climbed about 7.2 percent from 2010 levels, according to the indexes. Fiserv and Moody’s Economy.com base the housing forecast on factors that include income growth, demographic trends, unemployment rates, foreclosure rates, and construction costs. Of 384 places surveyed, the Bremerton-Silverdale area in Washington State had the highest four-year growth forecast, with prices expected to increase 44.7 percent from 2010 to 2014. Other leading growth markets: Bend, Ore., where prices are expected to jump 33.6 percent by 2014, and Detroit, with a 33.1 percent forecast. Markets with the weakest projections: Miami and Naples in Florida and Atlantic City, N.J., where prices are expected to continue to fall over the next four years.

Top 10 Housing Markets That Will Be Strongest by 2014

1. Washington

Biggest home price increase projected in 2014: Bremerton-Silverdale metro

Forecast 4-year price increase: 44.7 percent
Current median price: $245,000
Prices to reach trough in: 2010 Q1
Median family income: $69,900
Population: 240,860

The Bremerton-Silverdale area, on Puget Sound's Kitsap Peninsula, has the highest growth forecast of all MSAs in the country, with prices expected to jump 44.7 percent by 2014, according to Fiserv. Cathy Doney, general manger for Reid Real Estate in Silverdale, says the waterfront community has benefited from government employment, which has helped sustain the job market, and attracted buyers looking to live close to Seattle at a lower cost. Washington’s second-strongest market is Tacoma, with a growth rate expected to be 33.1 percent. Prices in the Seattle area are expected to grow 25.5 percent by 2014.

Index used to calculate historical home price changes: Case-Shiller

2. Oregon

Biggest home price increase projected in 2014: Bend metro

Forecast 4-year price increase: 33.6 percent
Current median price: $144,533*
Prices to reach trough in: 2011 Q1
Median family income: $58,200
Population: 158,630

The area around Bend area, in central Oregon's high desert by the Cascade Mountains, has the second-highest four-year growth forecast, 33.6 percent, after Bremerton-Silverdale, Wash. Bend draws home buyers and visitors with its wealth of outdoor recreational opportunities, but its prices have dropped about 40 percent since hitting a peak in late 2006. Fiserv and Moody's Economy.com now expect a rapid recovery starting next year. Greg Broderick, a real estate broker in Bend, says prices have overcorrected and buyers are seeing good value in the market. Homes priced the low hundred-thousand-dollar range "are being snapped up at a furious pace," he says. Still, the area must deal with a higher-than-average unemployment rate, which the BLS says was 13.4 percent in June.

Index used to calculate historical home price changes: FHFA

3. Michigan

Biggest home price increase projected in 2014: Detroit-Livonia-Dearborn metro

Forecast 4-year price increase: 33.1 percent
Current median price: $51,000
Prices to reach trough in: 2011 Q2
Median family income: $54,400
Population: 1,925,850

Since reaching a peak in 2006, home prices in the Detroit area have fallen 60.5 percent, according to the Fiserv Case-Shiller Indexes. As homes have become more affordable—the median home price in Detroit is lower than median family income—demand is expected to pick up. Prices are forecast to jump 33.1 percent over the next four years. George Moma, a broker with Century 21 Dupont Realtors, says the growing prevalence of short sales over foreclosures will help drive up the median price in the Detroit metro area. He adds that the area is attracting interest among international investors from the U.K., Dubai, Moscow, India, Ireland, and France.

Index used to calculate historical home price changes: Case-Shiller

4. California

Biggest home price increase projected in 2014: Napa metro

Forecast 4-year price increase: 31.7 percent
Current median price: $355,000
Prices to reach trough in: 2010 Q4
Median family income: $79,600
Population: 134,650

Prices in the Napa area have dropped an enormous 44.6 percent since peaking in early 2006, according to first-quarter 2010 data from Fiserv and Moody’s Economy.com. Despite the drop, home prices are expected to rebound quickly. According to an article in the St. Helena Star, Napa County is vulnerable to economic and real estate market fluctuations, but the impact is mitigated by managed growth and the county’s natural and agricultural resources. The unemployment rate in the Napa area fell to 9.3 percent in June, from 11.1 percent in January, according to the BLS.

Index used to calculate historical home price changes: Case-Shiller

5. Nevada

Biggest home price increase projected in 2014: Carson City metro

Forecast 4-year price increase: 31.6 percent
Current median price: $141,524*
Prices to reach trough in: 2011 Q2
Median family income: $63,100
Population: 55,180

By the second quarter of 2011, prices in the Carson City area are expected to have fallen 34.4 percent from peak levels, according to the Fiserv and Moody's Economy.com. Recovery will depend on job creation, as the unemployment rate was 13.4 percent in June, according to the BLS. While expectations for near-term economic growth have diminished recently and competition for jobs is extremely high, opportunities exist, even in a declining labor market, according to Nevada's Employment, Training, & Rehabilitation Dept.

Index used to calculate historical home price changes: FHFA
* Source: John Burns Real Estate Consulting, April 2010

6. Florida

Biggest home price increase projected in 2014: Panama City-Lynn Haven-Panama City Beach metro

Forecast 4-year price increase: 26.9 percent
Current median price: $158,669*
Prices to reach trough in: 2010 Q3
Median family income: $53,800
Population: 164,770

Home prices in the Panama City area fell about 27 percent after hitting a peak in 2006, according to the FHFA home price index. Jennifer Mackay, an agent at Keller Williams Success Realty in Panama City, says the market was stabilizing earlier this year, but the BP oil spill led some buyers to pull out and sent the rental market into a tailspin. Despite the area’s large number of foreclosures (1.93 percent in the first half, according to RealtyTrac), Mackay says the new Northwest Florida Beaches International Airport, which opened in May, should help stimulate local business. "I see our economy doing better than others over the course of the next year," she says. The area's unemployment rate reached 12.1 percent in January and dropped to 9.3 percent in June, according to BLS data.

Index used to calculate historical home price changes: FHFA

7. Arizona

Biggest home price increase projected in 2014: Flagstaff metro

Forecast 4-year price increase: 26 percent
Current median price: $278,000
Prices to reach trough in: 2011 Q3
Median family income: $56,700
Population: 129,850

Although Arizona has been one of the states hit hardest by the housing downturn, sales activity in the Flagstaff area, home to Northern Arizona University and Flagstaff Medical Center, has picked up since the start of the year, due in part to the home buyer tax credit. Flagstaff-based broker Ann Heitland says prices still may drop in the near term, but the decrease will be limited by shrinking inventory, as there has been a lack of new construction in the area. She adds that because more than one-fifth of the Flagstaff market is second homes, demand from second-home buyers from Phoenix will also affect the recovery.

Index used to calculate historical home price changes: Case-Shiller

8. New Mexico

Biggest home price increase projected in 2014: Santa Fe metro

Forecast 4-year price increase: 25.8 percent
Current median price: $197,601*
Prices to reach trough in: 2010 Q3
Median family income: $64,300
Population: 147,530

Fiserv and Moody’s Economy.com expect prices in Santa Fe to drop a total of 13.4 percent from their height in 2007. Lois Sury, president of the Santa Fe Association of Realtors, states in a release that median prices fell during the second quarter, but homes are moving across all price ranges. Sales in the city and county of Santa Fe rose 40 percent during the second quarter, compared with the same period last year, according to the association.

Index used to calculate historical home price changes: FHFA
* Source: John Burns Real Estate Consulting, April 2010

9. Wyoming

Biggest home price increase projected in 2014: Cheyenne metro

Forecast 4-year price increase: 23.7 percent
Current median price: $106,602*
Prices to reach trough in: 2010 Q1
Median family income: $62,600
Population: 88,850

The Cheyenne metro area, which includes Laramie County, has been a fairly stable market, with home prices estimated to drop only 2.6 percent from peak to trough. Home prices increased in June, and the average time on the market decreased, according to the Cheyenne Board of Realtors. The metro area had a 7 percent unemployment rate in June, according to the BLS.

Index used to calculate historical home price changes: FHFA
* Source: John Burns Real Estate Consulting, April 2010

10. Alaska

Biggest home price increase projected in 2014: Anchorage metro

Forecast 4-year price increase: 20 percent
Current median price: $177,699*
Prices to reach trough in: 2010 Q1
Median family income: $77,700
Population: 374,550

The housing market in Anchorage has been stable: The estimated peak-to-trough price drop was only 2.1 percent, according to the Fiserv Case-Shiller Indexes. Home sales, aided by the first-time home buyers' tax credit earlier this year, as well as the fact that the area is home to many people who work in the resilient energy sector, are projected to stay strong as buyers take advantage of lower prices and low mortgage rates. According to Housingpredictor.com, "the state is seeing few foreclosures and is already showing signs of recovering."

Index used to calculate historical home price changes: FHFA
* Source: John Burns Real Estate Consulting, April 2010

Acceptable Hardships for Florida Short Sales

Thu, 05 Aug 2010 15:31:00 GMT

I have encountered quite a few people in my Real Estate tenure that assume that anyone who owes more money than the home is worth and wishes to short sell their Florida home can do so with no problem. This is incorrect.

Sorry to burst your bubble but it does not always work that way. In some respects it actually doesn’t make sense that those who have kept their obligation to their lender, made their payments and don’t have a hardship are not always allowed to short sell their home.

Sometimes life is not fair. It’s quite possible your neighbor may be able to complete a short sale and you might not be so lucky.

Most but not all of the time your lender is going to require some kind of hardship in order to complete a Florida short sale. In other words you are going to need to qualify for a short sale in order to complete one.

Just wanting to walk away and get a less expensive home is not a reason to do a short sale and most likely the lender will deny the short sale request.

So what are some of the legitimate reasons a lender will consider as a hardship for doing a short sale?

Any of the following will most likely qualify as a legitimate hardship for a Florida short sale:

* A reduction in income through the loss of a job, disability, illness, or just the straight reduction in hours that a causes the inability to continue to make payments.
* Marital difficulties – Separations and divorces are legitimate reasons a lender will consider a short sale.
* An increase in expenses – Reasons could include an increase in dependents, an illness, etc.
* An increase in significant debts – credit cards bills, medical bills, legal fees and other similar types of debt.
*Death – Death of a family member who was a contributing factor in keeping the mortgage current. Also the corresponding loss of income or medical bills associated with the death such as funeral expenses, ect.
* Relocation for a job – The relocation must be due to a job change and lenders also typically require the move to be over 50+ miles.
* Military service – There are some lenders that will accept being called into military service as an acceptable hardship.

When you are applying for a short sale you will be asked to write a hardship letter that is going to detail to the lender why you are no longer able to make mortgage payments on your home. The hardship letter will be one of the determining factors on whether a short sale is approved or not.

If you are considering short selling your Florida home I would make certain that you have done your homework on who you are going to work with. The Realtor that will be representing you should be well versed in all the legalities and procedures involved with a short sale. There are numerous Real Estate agents that are starting to work with short sales, yet don’t have any idea as to how the Short Sale will get approved.

Hiring a Realtor to represent you in a short sale is far more important than a traditional sale. In all likelihood it could be the difference between getting FORECLOSED on or not! I would encourage you to read some of the Florida short sale articles I have written which cover most of the things you will need to be aware of to have short sale success.

Thinking of short selling your home? I can help you get the process done!

I service the following area of Miami Dade County: Miami Beach, Brickell Area, Downtown Area, North Bay Village, Normandy Isle, Surfside, Sunny Isles.

The Skinny on Short Sale Transactions

Wed, 04 Aug 2010 13:48:00 GMT

The term short sale has unfortunately became a common buzz word in the Real Estate and Mortgage industries. For those of you that have been hearing the term "short sale" and don't really understand what it all means, a short sale is a legal lender approved solution designed to assist the home owner who is financially strapped to get out of their mortgage debt.

A short sale is negotiated through the mortgage holder of the owners home where by the mortgage holder agrees to take less than what home owner owes on the property.

A quick example of a short sale would be if a home owner owes $700,000 on their current mortgage and their home is only worth $550,000. The lender in this example would agree to take a short fall of $150,000.

In some instances the mortgage holder may completely wipe the debt clean and the home owner does not have to repay the $150,000. Some lenders may however require the seller to sign a note and repay the debt over a certain amount of time. Typically, the debt will be reduced and the owner may receive more favorable repayment terms from the short fall.

There is quite a bit to know about short sales from both the buyer's and seller's perspective. I have been successfully been completing Florida short sales. In fact, I have never had a short sale that did not get approved! Successfully completing a short sale is about understanding the process and understanding what the bank is expecting from all parties involved.

Many consumers make extremely poor choices by working with Real Estate agents that don’t have any experience with the short sale approval process. Picking a good short sale Realtor is critical to your success in getting your property approved for the short sale and sold.

Thinking of Short Selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following areas of Miami Dade County: Miami Beach, Brickell Area, Downtown Area, North Bay Village, Normandy Isle, Surfside, Sunny Isles.

Homes lost to foreclosure on track for 1M in 2010

Thu, 15 Jul 2010 18:24:00 GMT

LOS ANGELES (AP) – July 15, 2010
More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.

“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.

By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.

The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.

The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.

In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.

Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn’t read too much into that.

“The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market,” he said.

On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.

Assuming the U.S. economy doesn’t worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.

And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn’t improve fast enough to lift home sales.

The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

“The downward pressure from foreclosures will persist and prices will be very weak well into 2012,” said Celia Chen, senior director of Moody’s Economy.com.

She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.

Lenders are offering to help some homeowners modify their loans. But many borrowers can’t qualify or they are falling back into default. The Obama administration’s $75 billion foreclosure prevention effort has made only a small dent in the problem.

More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.

Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.

Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.

Copyright 2010 The Associated Press, Alex Veiga, AP Real Estate Writer. AP Real Estate Writer Alan Zibel in Washington contributed to this report.

Tax Implications Of A Short Sale

Thu, 15 Jul 2010 16:01:00 GMT

When doing a short sale the debtor may receive a form 1099-C for the amount of the lender's losses. This is considered loan forgiveness in the eyes of the IRS and the lender may issue a form 1099-C.

If the debtor has other assets such as savings and is not insolvent, the debtor may end up being responsible to pay ordinary taxes on the amount of the 1099-C.

If the debtor settles a debt with a creditor for less than the full amount owed, the debtor may be required to report the forgiven debt as regular income, with certain exceptions. The forgiven debts include money owed after foreclosure or property repossession or credit accounts are not paid. Exceptions noted below.

If a lender forgives or writes off $600 or more of a debt's principal (the amount not including interest or fees) the lender must send the debtor and IRS a Form 1099-C at the end of the year. When the debtor files tax returns for the tax year in which the debt was written off, the IRS requires that the amount is reported as income.

Warning: The debtor may not receive this form from the creditor even though the creditor submitted the form to the IRS. If the creditor does list the income on their tax return and the IRS has the information of the transaction on file, the debtor could get a tax bill or, worse, an audit notice.

There are several exceptions stated in the Internal Revenue Code. For example, you do not have to report the income on your tax return if the write off of the debt is intended as a gift, you discharge the debt in bankruptcy, or you were insolvent before the creditor agreed to settle or write off the debt. Always encourage the debtor to consult qualified tax and legal counsel to see if these circumstances apply.

It is important to realize the tax implication is only on the amount of the forgiven debt.

Example: The lender is owed $150,000 and agrees to accept a $100,000 short sale. The amount of forgiven debt is $50,000 and the most the lender could report on a 1099. Assuming the debtor was in a 15% tax bracket the tax consequences would be $7,500.

By comparison if the property was sold at public auction and brings $100,000 the lender could seek a deficiency judgment against the mortgagor to recover the $50,000 shortage, plus foreclosure expenses. The short sale is the much better alternative.

More than 25 percent of first-quarter home sales were foreclosures

Wed, 14 Jul 2010 16:42:00 GMT

07.14.10
By Credit.com Staff

In an effort to find more affordable home prices, more Americans turned toward foreclosures during the first quarter of 2010, according to a new report. The study - conducted by foreclosure listing and information website Foreclosure Deals - reveals that 31 percent of home sales during the first three months of the year were for homes whose previous owners defaulted on their mortgage loans.

The total number of foreclosure home sales during the first quarter is 33 percent lower than those sold during the first three months of 2009. A combined total of 232,950 foreclosed homes were sold in January, February and March. Lower sales prices are one of prime reasons consumers turn toward a foreclosure, with the average price being 27 percent lower than a traditional home during the first quarter of 2010.

"Buyers are attracted to foreclosures because they offer tremendous discounts," Foreclosure Deals business analyst James Foxx said. "The numbers show that each year, the total number of foreclosures sold has increased, and that's not just a reflection of supply. They're very popular, and for good reason, there's no better investment value in real estate currently out there."

Statistics reveal that foreclosure home sales have increased by 320 percent overall since 2007.

Many lenders, such as Fannie Mae, have implemented programs and created help centers to assist borrowers and try to reduce the incidence of foreclosure. But as unemployment rates remain high and the backlog in repossessing foreclosed properties may be skewing the real amount of Americans who have defaulted on their mortgage, it is unlikely that recovery will come as quickly as many individuals hope.