destin short sale

Will I have to pay income taxes on my short sale?

Oct 31st, 2012
by edsmith.
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According to the IRS, forgiven or written-off mortgage debt is the same as taxable income. If you complete a short sale on your property, the difference between the lender’s net and the mortgage balance due is referred to as the deficiency.  The lender is required to issue a 1099 if they are writing off the deficiency.  This is often referred to as “phantom tax” as you could end up owing taxes for money that you did not actually receive.

However, the Mortgage Debt Relief Act of 2007 provides for certain levels of insulation against the phantom tax, at least in the case of your primary residence. Vacation properties would not qualify under the act. The bad news?  Unless extended by Congress, this act will expire at the end of the year.  For more, visit: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation–

 

Who Pays for Past Due HOA Fees on a Short Sale?

Dec 30th, 2011
by edsmith.
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The foreclosing lender will often pay up to a point, but we have seen many cases in which the back HOA fees exceed $50,000. We are working on one now with a $65,000 HOA lien on it!

The lenders know that they only have to pay for the most recent twelve months in past due HOA fees should they foreclose the property, so they are often less than enthusiastic about paying more than that. Knowing this, many HOA’s will negotiate the fee down to facilitate the transaction.

It is often a win-win if the HOA can come out with much more than the stautorily mandated twelve months worth of fees. However, in a short sale, both buyers and sellers should be prepared to contribute should the foreclosing lender and HOA reach an impasse.

PMI Group, Inc. Files Chapter 11

Nov 25th, 2011
by edsmith.
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According to PMI, their Chapter 11 bankruptcy filing is in response to the seizure of two of its subsidiaries by their primary regulator in Arizona last month. The subsidiaries include PMI Mortgage Insurance Co. and PMI Insurance Co., who make up a significant share of the private mortgage insurance market in the U.S.

 

According to PMI, they now wish to “raise additional capital from new investors in order to allow a third subsidiary, PMI Mortgage Assurance Company, to serve as a platform to write new mortgage insurance nationwide”.

 

The Arizona Department of Insurance said that PMI will be making claim payments “at 50 percent”. Presumably, that means that the unpaid balance of the claim will become part of the bankruptcy creditor claims. It is interesting that none of PMI’s subsidiaries themselves filed bankruptcy, only the parent company. While PMI states that they will continue to operate in the ordinary course of business, as a debtor-in-possession, their operations will be under the scrutiny of a Federal Bankruptcy Court.

 

Sitting on approximately $735 million in unsecured notes that are now due and payable, it is yet unclear as to how PMI’s move will impact the many lenders around the nation who are presently seeking claims reimbursements. Also in question is how this may impact the many tens of thousands of short sales that PMI has insured. If bankruptcy court approval will now be required for claims authorization, the short sale process nationwide and along the Emerald Coast as well could be dealt yet another unwanted setback. Time will tell.

As The Market Turns

Oct 27th, 2011
by edsmith.
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According to Realty Trac, foreclosure filings have surged by 17% in what is being interpretedas a possible end to the review process that has hampered and bogged down the process for more than a year.  A review system was initiated by most of the major lenders in response to the robo-signing debacle that they faced last summer.
 
Many in the know do believe that major lenders are gearing up to accelerate the foreclosure process next year. Consequently, many of them are also gearing up to approve higher numbers of short sale transactions. As an example, Bank of America will complete approximately 100,000 short sales nationally in 2011, but has plans to complete 160,000 short sales in 2012.

We are buying a short sale in Destin. Why are we required to agree to not re-sell it for 90 days after we close?

Jun 9th, 2011
by edsmith.
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Many lenders are requiring that such restrictions be imposed on the sale of their distressed properties to help eliminate mortgage fraud. Some lenders are now requiring a twelve month prohibition on the re-sale of their distressed properties.   
 
According to Freddie Mac’s Fraud Investigation Unit http://www.freddiemac.com/singlefamily/preventfraud/spotlight.html , if you contract to purchase a short sale and re-sell it (have it under contract) for more money prior to taking possession, you have committed mortgage fraud.
 
For information on short sales, bank foreclosures and general real estate topics, please visit http://www.floridabrokers.com   or email Ed and Terri Smith at  smith@realtor.com 

How long after a short sale can I qualify to buy a new home?

Feb 8th, 2011
by edsmith.
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The answer depends upon which type of financing you wish to pursue. After completing a short sale as a seller, for example, VA and Conventional (Fannie Mae and Freddie Mac) mandate a two year wait. Another arm of the federal government, FHA, mandates three years.Non-conforming products such as that for jumbo and condo loans can be almost anything, depending upon the individual investor. From what we are seeing in the market though, non-conforming loan investors are requiring waiting periods of somewhat longer than that of the government sponsored loans. We have seen waiting requirements for non-conforming loans of from five to seven years. You may also expect higher than average down payment requirements.

To be on the safe side, short sale sellers should be prepared to face greater levels of credit scrutiny for a period of up to seven years after the successful completion of a short sale.

Is it possible to do a short sale when there is a second mortgage on the property?

Dec 22nd, 2010
by edsmith.
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Yes it is possible, but there can be twice as much work to do and more time required to get the short sale approved. Additionally, it is very important that the second mortgage not go more than ninety days in arrears. That is because as a matter of policy, many lenders will assign their seconds to a collection agency after three months of missed payments. These collection companies can be extremely difficult to work with and have been known to kill many a short sale.

If the first mortgagee in a foreclosure sale is “upside down”, meaning the value is less than the first mortgage balance, then the mortgageee in second position gets absolutely nothing.  Even so, many of these collection companies will make insane and unreasonable demands. As a typical example, one such collection company recently demanded $30,000 on a $60,000 second mortgage from the short sale seller who was basically destitute. This seller had lost his job, had spent every dollar of savings trying to keep up his payments. He had nothing left. He could no more come up with $30,000 than the man in the moon.
 
In that case, the first mortgagee was already taking a huge hit, writing off nearly $100,000. The first offered the collection agency in second position $5,000 to settle. The collection company would not agree, the property went to foreclosure and the collection company received exactly what they deserved, which is nothing.
 
In another case … We recently sold a  short sale condo across from the Gulf of Mexico. A collection company was involved and hindered the sale for 26 months!  Yes, we had the property under contract on five separate occassions over a 26 month period of time. Even funnier? We originally had the property under contract for $325,000. 26 months later when the collection company finally agreed to the terms, we sold and closed the property for $209,000.  Effectively, the collection company cost the first mortgagee $116,000.  Even funnier still?  The first morgagee also owned the second mortgage and had assigned it to the collection company.  The collection company was negotiating against their own client!!
 
Some day we will look back at all this and laugh …??

Treasury Announces Short Sale Changes

Dec 2nd, 2009
by edsmith.
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 The U.S. Treasury Department under the Making Home Affordable program has released a plan to speed up and encourage Short Sales as a means to help families avoid foreclosure. RE/MAX International has been heavily involved in efforts to streamline Short Sale proposals for over a year, and although the new guidelines aren’t everything we would hope for, they do represent a significant improvement over the current situation.
Short Sales have been difficult to close, and these new measures are a huge step in the right direction. One major highlight: A lender must give a yes or no answer to an offer within 10 days.
 
Also included: a moving allowance, incentives for sellers and lenders, commission rules, and a stipulation that releases sellers from debt liabilities.
The Treasury Department has finally announced their finalized rules for SHORT SALES under the Making Home Affordable program.
 
In a nutshell:
· Mandatory consideration of short sale after HAMP, before foreclosure
· Pre-approved terms from servicer before property listing
· 10 days for servicer to accept/reject offers

· Agents commission protected

· Incentive payments to servicers

· Relocation allowance to borrower

· Guidelines and system to try and clear second lien roadblocks

· Servicers must implement by April 5, 2010

 Unofficially, some folks at FANNIE MAE have indicated that between now and April, Fannie will be rolling out PILOT PROGRAMS in CALIFORNIA and FLORIDA that will follow similar if not exactly the same rules. Based on these pilots, Fannie and Treasury will tweak these rules as necessary before the national roll out in April.

 Here’s an initial Reuters news story <http://web04.echomail.com/web04/l.do?cid=204&mid=2192&e=rq~rq-greev.pbz&t=10703>  outlining the new policies.

Here is the announcement from Treasury <https://www.hmpadmin.com/portal/docs/news/hampupdate113009.pdf>  and the actual guidelines as published in Supplemental Directive 09-09 <https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf>

Also, here is a short article in DS News that summarizes things <http://www.dsnews.com/articles/index/treasury-releases-guidance-for-making-home-affordable-short-sales-2009-12-01>

Q: You said earlier that less than 20% of the short sales get approved. With those odds, why would anyone try?

Sep 28th, 2009
by edsmith.
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 A: Although the national averages look gloomy, there is hope if you want to sell or buy a short sale. Many knowledgeable agents around the nation have much higher than average success rates.

Our personal short sale success rate now stands at more than 95%. As more agents become proficient with short sales, we believe that the national averages will improve as well.

On the other hand, consider how much smoother the process would be if the 80% that will never be approved were never submitted. The entire process would be much more streamlined and efficient.

 

Short Sale Mania

Sep 4th, 2009
by edsmith.
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So, you think you want to buy a short sale?
 
Roughly 65% of all pending sales in our market fall into one or more distressed property catagories. That could be a short sale, pre-foreclosure, bank owned, etc.
 
The number of these pending sales equates to about twice the number of actual monthly closings. We are now learning that on a national basis, less than 20% of all submitted short sales are approved and actually close. Additionally, the process is becoming so protracted that many of the short sale buyers give up long before they get a response back from the foreclosing lender. With less than 20% of the short sale contracts being approved on a national basis, the odds of success are slim at best.    
 
So why do more than 80% of the short sales fail to close? Inexperience on the part of the real estate agents, period. The majority of short sale offers are so far below the lender’s minimum threshhold that the offers will never see the light of day. All these lowball offers only serve to bog down an already overwhelmed system.
 
So what to do?
 
Finding an experienced, qualified short sale agent should be your top priority. That is the single biggest factor in determining whether or not your transaction will be successful. Remember that for most real estate agents, the short sale business is a very recent phenomenon.  However, some of us have been orchestrating short sales for years. 
 
We know how to structure the short sale proposals. We know what the parameters are and what the lender will likely accept.  At 96%, our short sale success rate over the past three years far exceeds that of the national average.  There is no substitute for experience.
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