A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
A short sale typically is executed to prevent a home foreclosure. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency.
Short sale is not the guarantee that the bank will accept the offering price on the property and can take anywhere from 90-120 days to receive an answer from the lender whether they are or are not accepting the deal.
If you have any further questions, please don't hesitate to contact me directly.
Saturday, February 21, 2009
Friday, February 20, 2009
STIMULUS BILL - $8,000 FOR HOMEBUYERS
Final score: $8,000 for homebuyers
First-time purchasers get a tax credit windfall if they buy before December.
By Les Christie, CNNMoney.com staff writer
February 16, 2009: 5:38 PM ET
NEW YORK (CNNMoney.com) -- There's a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama's signature on Tuesday. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
Not exactly. Billings won't get $8,000 on top of his current refund, but he would turn that small refund into a much larger one. If his total tax liability came to $6,000, but he had $7,000 withheld from his payroll, he would normally receive a $1,000 refund. With this credit, his refund would total $8,000. If the credit were non-refundable, as was originally proposed in the Senate version of the stimulus package, he would have only received $6,000, or the total amount he paid in.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm reception
The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.
"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."
Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.
Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.
Instead, many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.
And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.
First-time purchasers get a tax credit windfall if they buy before December.
By Les Christie, CNNMoney.com staff writer
February 16, 2009: 5:38 PM ET
NEW YORK (CNNMoney.com) -- There's a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama's signature on Tuesday. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
Not exactly. Billings won't get $8,000 on top of his current refund, but he would turn that small refund into a much larger one. If his total tax liability came to $6,000, but he had $7,000 withheld from his payroll, he would normally receive a $1,000 refund. With this credit, his refund would total $8,000. If the credit were non-refundable, as was originally proposed in the Senate version of the stimulus package, he would have only received $6,000, or the total amount he paid in.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm reception
The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.
"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."
Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.
Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.
Instead, many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.
And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.
Saturday, February 7, 2009
February Newsletter
Friday, February 6, 2009
WHAT IS BANK-OWNED/ REO/ FORECLOSED PROPERTY?
What is an REO? REO means "real estate owned" and is a term used by the financial industry to describe properties (assets) that a financial institution has possessed by foreclosure, a deed-in-lieu of foreclosure, or other means. REO properties are also called "bank owned" or "corporate owned" because the owner of record is an institution instead of a natural person.
Is an REO property a "better" deal that other properties on the market? Only a willing buyer and seller determine the purchase price of a property. Just like other resale homes, REO properties have different amenities and are in various stages of age and repair. All of these factors influence the price that a buyer and seller are willing to agree on.
What kind of financing is available for an REO property? It is a sad truth that some properties have been vandalized. Certain loan products (for example, FHA loans) are not available for properties that do not have certain appliances, floor coverings and utilities. Check with your loan provider for complete and up-to-date details about your loan requirements.
How will you know if you are competing against other potential buyers? Listing agents may or may not have authority from the seller to disclose multiple offers. The REALTOR Code of Ethics requires a listing agent to have the seller's approval before disclosing the existence of other unaccepted offers on the property. A seller may respond to numerous offers with a "multiple counteroffer." This document alerts two or more buyers that they are in a competitive situation.
Can you choose the title company? Typically, the banks and lenders who have foreclosed on these homes have established business relationships with title companies, who often act as the escrow holder. Even before a home is put on the market, the title company may have opened a file and started its research on the title. Under federal law, a seller cannot require a buyer to purchase title insurance from a particular company, but if the seller is paying for the buyer's title policy then the seller may choose the title company. For a consumer's guide to title insurance, go to
What kind of disclosures will you receive from the seller? Federal and state laws require a seller to make certain disclosures to a prospective purchaser. The "Residential Disclosure Guide" provided by the Real Estate agent outlines these disclosures. Some disclosures, such as the Seller's Real Property Disclosure, can be waived according to state law. Others, such as the Common Interest Community resale package, cannot.If you close escrow without receiving a required disclosure, your right to sue for such a failure may be affected. If you have any concerns, consult with legal counsel prior to closing escrow.
Will the seller pay for repairs? A typical REO is sold "as is," meaning that the seller will not do repairs on the property or provide funds at closing for repairs. However, buyer's agents may still ask for repairs and attempt to negotiate that point. As the adage goes, "you won't know unless you ask." You may not receive multiple keys or garage openers.
Should you have home inspection? Although an REO seller may not provide a property disclosure or make repairs, the buyer is still entitled to have an inspector review the home. Buyers should consult whatever qualified professionals (such as home inspectors, mold inspectors, pest/termite inspectors) they desire to determine the state of the property and whether the property meets their needs.
This is general information and is not intended to provide information or advice on any specific transaction. Parties to any real estate transaction should seek competent legal and/or tax counsel to determine the legal, credit and tax consequences of buying or selling a home.
Is an REO property a "better" deal that other properties on the market? Only a willing buyer and seller determine the purchase price of a property. Just like other resale homes, REO properties have different amenities and are in various stages of age and repair. All of these factors influence the price that a buyer and seller are willing to agree on.
What kind of financing is available for an REO property? It is a sad truth that some properties have been vandalized. Certain loan products (for example, FHA loans) are not available for properties that do not have certain appliances, floor coverings and utilities. Check with your loan provider for complete and up-to-date details about your loan requirements.
How will you know if you are competing against other potential buyers? Listing agents may or may not have authority from the seller to disclose multiple offers. The REALTOR Code of Ethics requires a listing agent to have the seller's approval before disclosing the existence of other unaccepted offers on the property. A seller may respond to numerous offers with a "multiple counteroffer." This document alerts two or more buyers that they are in a competitive situation.
Can you choose the title company? Typically, the banks and lenders who have foreclosed on these homes have established business relationships with title companies, who often act as the escrow holder. Even before a home is put on the market, the title company may have opened a file and started its research on the title. Under federal law, a seller cannot require a buyer to purchase title insurance from a particular company, but if the seller is paying for the buyer's title policy then the seller may choose the title company. For a consumer's guide to title insurance, go to
What kind of disclosures will you receive from the seller? Federal and state laws require a seller to make certain disclosures to a prospective purchaser. The "Residential Disclosure Guide" provided by the Real Estate agent outlines these disclosures. Some disclosures, such as the Seller's Real Property Disclosure, can be waived according to state law. Others, such as the Common Interest Community resale package, cannot.If you close escrow without receiving a required disclosure, your right to sue for such a failure may be affected. If you have any concerns, consult with legal counsel prior to closing escrow.
Will the seller pay for repairs? A typical REO is sold "as is," meaning that the seller will not do repairs on the property or provide funds at closing for repairs. However, buyer's agents may still ask for repairs and attempt to negotiate that point. As the adage goes, "you won't know unless you ask." You may not receive multiple keys or garage openers.
Should you have home inspection? Although an REO seller may not provide a property disclosure or make repairs, the buyer is still entitled to have an inspector review the home. Buyers should consult whatever qualified professionals (such as home inspectors, mold inspectors, pest/termite inspectors) they desire to determine the state of the property and whether the property meets their needs.
This is general information and is not intended to provide information or advice on any specific transaction. Parties to any real estate transaction should seek competent legal and/or tax counsel to determine the legal, credit and tax consequences of buying or selling a home.
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