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!

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 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.
 

Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy.

"Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting," said Terence Edwards, an executive vice president.

A strategic default is when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are "underwater," or owe more than their houses are worth.

Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default. The company plans to instruct its servicers to monitor loans facing foreclosure and recommend cases to pursue for such judgments.

A spokesman for fellow government-backed mortgage buyer Freddie Mac said its current policy requires at least a five-year wait. Freddie Mac will "take a close look" at the new Fannie policy, said spokesman Brad German.

Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.

The wave of foreclosures affecting Fannie and Freddie loans has caused a major problem for the U.S. government, which effectively guarantees the loans.

The government seized control of Freddie and Fannie in September 2008, a rescue that has cost taxpayers $145 billion so far.

The two companies show no signs so far of becoming self-sufficient.

by Francesca Levy
Forbes.com

In these cities, the housing crisis is expected to worsen.

Since the late 1970s casino-rich Atlantic City, N.J., has been a beachfront escape for poker aficionados and Keno-loving retirees from Philadelphia, Northern New Jersey and New York.

Today, buying a home in Atlantic City is a gamble. Of 315 cities measured by Local Market Monitor, a Cary, N.C.-based real estate research firm, the Atlantic City metro is expected to experience the largest drop in home value over the next 12 months. A pocket of Northwestern cities where restrictions on building have artificially inflated prices, and smaller metros whose housing markets have benefited from internal migration, join Atlantic City on our list of real estate trouble spots.

Like cities in California, Florida, Nevada and Arizona, Atlantic City saw a dramatic run-up in prices during the housing boom due, in part, to speculative purchases of second homes; Atlantic County includes popular beachfront spots such as Margate. But while those bubble markets have already burst, Atlantic City still has significant price depreciation ahead; Local Market Monitor predicts the metro's median home price will fall 9% in the next year.

"We have not seen the bottom in that market," says Jeffrey Otteau, president of East Brunswick, New Jersey-based Otteau Valuation Group, who says the city is still saddled with 12 months of unsold housing inventory.

As the effects of the recession sink in, the market for second homes in the metro has all but dried up, delaying a local recovery. What's more, tumbling revenues for the gambling industry have cost casino workers jobs, damaging the area's employment base.

Behind the Numbers

To put together our list of housing markets expected to drop, Local Market Monitor measured 315 Metropolitan Statistical Areas and selected the ones where it anticipated average home prices would fall most in the next 12 months. It then narrowed the list to cities where actual average home prices were at least 10% above their equilibrium price--that's where home prices should be based on economic fundamentals, and the price to which they will likely return. LMM calculates its equilibrium price and home value forecast based on trends in local jobs and income as well as the historic movement of home prices. Forbes relied on Local Market Monitor to rank each metro.

Cities in the Pacific Northwest appear on our list, in part, because some of the strictest land planning policies in the country have curbed sprawl and propped prices.

"It's very hard to overbuild in this region, because of urban growth boundaries and a fairly limited supply of developable property," says Randall Pozdena, managing director of ECONorthwest, a Eugene, Ore.-based consultancy. "Wages are 20 to 30% below what wages in the Bay Area are, but home prices are relatively high. We've created an artificial scarcity situation."

In Portland, Ore., homes are overvalued by 31%; in Bellingham, Wash., housing is 22% overpriced and in Eugene, Ore. homes are 21% more than they should be. Local Market Monitor expects prices in Portland to fall 9% in the next year; Eugene prices to drop by 8%; and Bellingham to see a 9% fall.

Smaller metros like Glens Falls, N.Y., Flagstaff, Ariz., and Salisbury, Md., all of which have a population under 200,000, are expected to see home prices drop 11%, 13% and 8%, respectively in the next year. In these places, small shifts in the local economy can cause big ripples.

"If you have one or two large employers in a smaller metro, they will have a greater impact on the jobs and income situation," says Carolyn Beggs, Local Market Monitor COO. "In larger metros there are more employers, so each employer won't have as great an effect."

All but two of the cities on our list saw above-average rates of population growth in the first half of the last decade. Some, like Provo, Utah, and Portland, Ore., saw their head counts rise by double-digit numbers (22% and 18%, respectively). Because in-migration typically boosts demand for housing, the national recession is due to take a particular toll on them.

"During a recession internal migration within the U.S. drops sharply," says Ingo Wizner, president of Local Market Monitor, noting that relocating becomes less financially feasible in hard times."Home prices in these markets are likely to fall for several years, but will then recover as above-average population growth resumes." Both Provo, a college town, and trendy Portland have sustaining appeal to young movers, which will likely pick up along with economic recovery.

Pozdena's outlook about Portland and other Pacific Northwest cities is more measured. While he predicts a short-term softening in prices in Portland, Bellingham and Eugene, he believes that limits to growth and continued in-migration will keep demand high.

"I do think we've been buoyed by some unusual forces," he says. "But I see most of those continuing, rather than reversing."

List: Tomorrow's Real Estate Trouble Spots

While metros like Miami, Las Vegas and Los Angeles have gained notoriety for plummeting home prices, it's not those markets that have the most to worry about now. These new housing trouble spots, most of which saw home prices peak after the national average, are set to see major price corrections in the next year. To identify them, Local Market Monitor, a Cary, N.C.-based real estate research firm found the Metropolitan Statistical Areas where it forecast the biggest average-home-price drops in the next 12 months, and where the actual average home price was 10% or more above what it would be without market volatility. Forbes relied on Local Market Monitor to rank each metro.

1. Metropolitan Statistical Area: Atlantic City-Hammonton, N.J.  

Equilibrium Home Price: $159,117.00

Overpriced: 54%

12-month Price Forecast: -9%

*Forbes relied on Local Market Monitor to rank each metro. 
 

2. Metropolitan Statistical Area: Provo-Orem, Utah  

Equilibrium Home Price: $136,247.00

Overpriced: 44%

12-month Price Forecast:-12%

*Forbes relied on Local Market Monitor to rank each metro.

3. Metropolitan Statistical Area: Portland-Vancouver-Beaverton, Ore.-Wash.

Equilibrium Home Price: $189,818.00

Overpriced: 31%

12-month Price Forecast: -9%

*Forbes relied on Local Market Monitor to rank each metro.

4. Metropolitan Statistical Area: Glens Falls, N.Y.

Equilibrium Home Price: $177,003.00

Overpriced: 22%

12-month Price Forecast: -11%

*Forbes relied on Local Market Monitor to rank each metro.

5. Metropolitan Statistical Area: Bellingham, Wash.

Equilibrium Home Price: $230,024.00

Overpriced: 22%

12-month Price Forecast: -9%

*Forbes relied on Local Market Monitor to rank each metro.

By Les Christie, staff writer with CNNMoney.com, On Wednesday February 3, 2010, 3:21 pm EST

NEW YORK (CNNMoney.com) -- As terrible as it is to lose your house to foreclosure, at least it's a relief to put your biggest financial headache behind you, right?

Wrong.

Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."

Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called "liar loans" where they didn't have to verify their income.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances -- like unemployment or a job transfer -- can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

"After the banks foreclose, it's very common now to have large deficiencies with houses not worth the balances owed," said Don Lampe, a North Carolina real estate attorney.

Lenders mostly declined comment. Although Corey's lender, BB&T did indicate it was pursuing more deficiency judgments.

"They follow the rise and fall of foreclosures," said the spokeswoman, who would not discuss Corey's account.

Can they come after you?

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.

"Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. "They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail."

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.

Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.

But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.

"People shouldn't have a false sense of security that a deficiency judgment may not be later sought," Zaretsky said.

He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.

"The parties who bought those notes wouldn't have paid money for them unless they had the intention of acting," Zaretsky said.

Ticking time bomb

What can be scary is that the judgments don't have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn't have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.

It wasn't until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.

"I told them, 'Hey, you guys released the title,'" he said. "As far as I know, I'm off the hook."

He wasn't. Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.

"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."

Lenders are also very inconsistent. One of Zaretsky's short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.

Strategic defaults

Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.

"We don't favor any short-sale contracts that leave any deficiency that can be pursued," he said.

Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.

# 1 Reason to Sell your property on Foreclosuredump.com: No Commissions!

With ForeclosureDump.com, there are no commissions to be paid. This equates to thousands of more dollars in your pocket: without having to pay realtors their standard 6% commission based on your sales price, you will be able to price your home more favorably that the buyer will want to make an offer and buy it.

Think about it: Six percent commission on a $300,000 sales price is $18,000. By Selling with Foreclosuredump.com you will keep the commission in your pocket and sell your property faster by pricing your property more aggressively to get it sold!!

# 2 Reason to Sell your Property on Foreclosuredump.com: The World Wide Web.

According to a recent survey 35% of all property sales occur on the internet. So why wouldn’t you want your property to be seen around the world. Not only is Foreclosuredump.com being used by the United States but it is also being used by 90 countries. This means that a person in Venezuela can be sitting in their office and see your property, contact you directly, negotiate the price and set up a meeting to see your property. No more worrying is the property being seen and is it getting any offers.

#3 Reason to Sell your Property on Foreclosuredump.com: Customer Service.

Our experienced and knowledgeable customer service department is available 24 hours a day 7 days a week to help you along the navigation process of Foreclosuredump.com. Whether you have questions about how to post the property or if you want to make changes to your posting we are here to help.

 #4 Reason to Sell your Property on ForeclosureDump.com: Community and Area Information

Your location is best known by you. You will have the ability to explain the community and area you live in. Some things to keep in mind: proximity to schools and hospitals, local dining and shopping malls, Close to airport or other forms of transportation.

 #5 to Sell your Property on ForeclosureDump.com: Complete Control over the Sale

You know your home better than anyone else. So why not sell your home one your own?

You will have complete control over your listing. You will be given an Account Manager that you can change the description, pictures and even the seller contact information at anytime during the time your property is online.

Reporting
Jorge Estevez
MIAMI (CBS4) ―

There's no humor in this top 10 list: The states hardest hit by foreclosure.
By Steve McLinden • Bankrate.com
And it's especially unfunny for homeowners and agents in Nevada, Florida, California and Arizona, who've languished in the top four for most of the real estate recession.

"Those states had similar scenarios," says Rick Sharga, senior vice president of RealtyTrac, a California-based firm that tracks U.S. foreclosures. "They all had unsustainably high home prices and had many buyers who really couldn't afford them -- most with toxic mortgages -- followed by (downturn-related) unemployment."

Some of the country's foreclosure problems revolved around a pervasive American mindset of "object identity," says Barbara Fitch of Pacific Star Real Estate in Corona, Calif. "The house is who they are and that is why (so many) are in this jam."

Unfortunately, the foreclosure beat goes on. RealtyTrac reports more than 300,000 U.S. properties received a foreclosure filing in November 2009 for the ninth straight month.

Here's a look at the top 10 states for foreclosure and how they got there:

No. 1: Nevada -- In third-quarter 2009, Las Vegas suffered the nation's highest foreclosure rate at 5.13 percent, or more than one foreclosure for every 20 households -- almost seven times the national average. Investors, who snapped up one of every three homes sold at the boom's height, were gambling on future gains after watching Vegas-area median home prices jump 122 percent from 2000 and 2006 -- twice the U.S. rise of 49 percent in that span.

The crash arrived, and real estate and construction jobs fell away -- followed by many casino jobs. While foreclosure numbers were improving near year-end 2009, a 13 percent Las Vegas unemployment rate and 12.2 percent rate in Reno/Sparks helped keep Nevada in the top spot.

No. 2: Florida -- In Miami-Fort Lauderdale-Pompano Beach, unemployment soared from just over 3 percent in early 2006 to 11 percent in fourth-quarter 2009, according to the U.S. Bureau of Labor Statistics, or USBLS. Orlando and Daytona Beach posted slightly higher unemployment, while Cape Coral-Fort Myers posted a 13.7 percent rate, helping place it at No. 4 on RealtyTrac's top 10 foreclosure cities. "It's likely that California will recover before Florida does, partly because of its net growth in population and partly because Florida is lousy with condos, which are typically the last to come back," Sharga says.

From 2003 to 2007 Florida prices doubled and tripled based largely on speculation, says Bernard Haddigan, managing director of Marcus & Millichap, a national commercial real estate brokerage specializing in real estate investment services. Homeowners were aggressively borrowing on future values and lenders were happy to cooperate, he says.

No. 3: California -- At year-end 2009, the Golden State had 18 statistical metro areas where unemployment exceeded 10 percent -- with nine of its cities in the bottom 14 in employment, according to the USBLS. In the hard-hit region surrounding Ontario, San Bernardino and Riverside, home values spiked from around $300,000 pre-boom to $800,000-plus at the market's zenith. When the bust hit, jobs were whacked quickly along with home values. "We learned to borrow against everything," says Fitch. "Buyers should buy houses for less than what they qualify for -- not because it's the largest or because it's a bargain."

Pamela Haile, a Realtor with Coldwell Banker Gonella Realty in hard-hit Merced, Calif. -- the top foreclosure city in the country -- says, "We had a lot of lender fraud going on with non-English speaking residents. They were rushed through with lenders who added income to their applications and lied to buyers that it was legal." In Merced, one in every 83 homes received a foreclosure filing in November. "Builders were manufacturing homes using an assembly line (in the area)," explains Julie Jalone of Roseville, Calif.-based MagnumOne Realty. "These homes were sold, sometimes in lottery style, before they were even built." Consequently, she says, owners with mortgages higher than the purchase price came to represent a large portion of the market.

No. 4: Arizona -- The 8.7 percent jobless rate in Phoenix-Mesa-Scottsdale is the lowest of the top five foreclosure states. However, Arizona foreclosure activity still jumped nearly 8 percent in November with one in every 186 homes getting a notice.

Despite a breakneck growth rate through the past decade, the area remains overbuilt residentially and commercially, says Kevin Schuck, senior vice president for CB Richard Ellis, a national commercial real estate firm. All the growth fueled a run-up in service-related and construction-related jobs "that gave people a false sense that it would continue forever," he says. In Phoenix and other high-foreclosure markets, banks are holding back foreclosure inventory to keep from flooding the market, Sharga says. Nevertheless, "we don't think the (overall U.S.) market will not feel much better until 2013," he says.

No. 5: Idaho -- The inclusion of Idaho, where one in every 259 homes received a filing in November, in the top five may surprise some -- but not Dale Alverson, certified buyer-broker with Boise, Idaho-based 43 Degrees North Real Estate. "It's not really surprising considering we had 20 percent-plus appreciation annually from 2003-2006," he says. "What economy can sustain that?" Add in interest-only loans, "stated-income" loans and investor over- exuberance, "and you had all the ingredients for the perfect real estate tsunami."

On the upside, buying opportunities currently abound in most distressed markets. "As many savvy billionaires have stated, 'Buy when everyone else is selling and sell when everyone else is buying,'" Alverson says.

No. 6: Michigan -- The state's automotive-related job losses have been well chronicled. Nearly 16,000 Michigan residences received foreclosure filings in November, or almost 10 percent above the state's totals in November 2008.

No. 7: Illinois -- The Land of Lincoln saw 16,422 properties owners receive foreclosure notices in November, nearly 108 percent higher than November 2008 and the third highest in volume among all states, according to RealtyTrac.

No. 8: Utah -- Between Jan. 1 and Sept. 30, 2009, about 42.4 percent of all Utah subprime adjustable-rate mortgages, or ARMs, were reset, compared with 27.8 percent nationally, according to the Federal Reserve.

No. 9: Maryland -- More than 30 percent of the state's foreclosures occurred in Prince George's County, which has just 10 percent of Maryland's housing stock. County officials blamed the problem on exotic loans and balloon mortgages.

No. 10: New Jersey -- About 3,000 New Jerseyans have received counseling through the Garden State's "Foreclosure Mediation Program."