Short-sale tips

Sacramento Bee

Published: Wednesday, Jun. 10, 2009 – 12:00 am | Page 14A

In a short sale, the sales price of a house falls short of the owner’s mortgage. Demonstrating a financial hardship may influence whether a bank or mortgage lender agrees to accept a short sale. Here are some tips for real estate agents and homeowners contemplating a short sale:

¢ Contact your lender as early as possible, even before listing the home.

¢ Work with real estate agents with experience in the short-sale process.

¢ Document your financial hardship, explaining why it is difficult to make your mortgage payments. Include pay stubs, bank statements and tax returns.

¢ Be available for an appraiser, and allow access as soon as possible.

¢ Make the lender a reasonable offer; find a buyer who makes a fair market offer.

¢ Respond quickly to requests for documents.

¢ Stay in constant communication with the lender.

Before you sell

Here are some things for sellers to consider before offering their home in a short sale:

¢ Some lenders may ask you to contribute toward their losses before approving the deal. Others may ask you to sign a promissory note to pay back some of the losses in the future. It may be worth talking with an attorney about your options if this is a condition of the short sale.

¢ The federal government will not come after you for forgiven mortgage debt. Typically, the IRS has taxed forgiven debt as extra income. But a 2007 law prevents the IRS from doing so through the 2012 tax year.

¢ The state of California is less clear. Through the 2008 tax year, the Legislature prevented the Franchise Tax Board from taxing forgiven mortgage debt as extra income. But bills to extend that protection through the 2012 tax year “ copying the federal practice “ are bogged down. One bill, AB111, failed in the Assembly. Another in the Senate, SB97, has stalled amid legislative efforts to plug the budget deficit.

Sources: Bank of America Home Loans; Bee research

http://www.realtor.org/RMODaily.nsf/pages/News2009051805?OpenDocument&WT.cg_n=RMO&WT.cg_s=RSSDaily

Click the link above for the entire story.

Daily Real Estate News    |    May 18, 2009    |    

Bank of America Revises Short Sale Policy
Bank of America, one of the country™s largest mortgage lenders, says it is loosening its policies on short sales in response to the U.S. Treasury Department™s announcement last week that it would increase incentives for lenders to work out short sale deals.

The government™s plan is a boon to banks, says David Sunline, BofA™s real estate management executive, because it provides guidance when there are multiple liens, a potentially litigious issue for lenders.

In the past, the bank followed Fannie Mae™s policy of giving second lien holders about 10 percent of the second mortgage balance in a short sale. Now when it holds the second lien, BofA will accept 5 percent of the net proceeds of the short sale, Sunline says. When it is the first lien holder, it will offer 5 percent to the holder of the second lien.

Sunline says home owners considering short sales should contact the bank within five days of getting an offer on the home and expect its cooperation as long as the offer is within the range of other sales in the area and the borrower can demonstrate financial hardship.

Source: The New York Times, Bob Tedeschi (05/15/2009)

https://www.donotcall.gov/  

Your registration will not expire. Telephone numbers placed on the National Do Not Call Registry will remain on it permanently due to the Do-Not-Call Improvement Act of 2007, which became law in February 2008. Read more about it at http://www.ftc.gov/opa/2008/04/dncfyi.shtm.

The National Do Not Call Registry gives you a choice about whether to receive telemarketing calls at home. Most telemarketers should not call your number once it has been on the registry for 31 days. If they do, you can file a complaint at this Website. You can register your home or mobile phone for free.

Register Now

Attention sellers and telemarketers: Go to https://telemarketing.donotcall.gov to subscribe to the National Do Not Call Registry.

If you are an exempt organization, and you wish to scrub your call lists, you may subscribe, but are not required to do so.

www.dwellicious.com  

MetroList is pleased to announce the addition of a brand new feature to MetrolistMLS.com – it’s called Dwellicious! and is the newest social networking tool that will help visitors to MetrolistMLS.com organize, share and discuss the search for their next home. Dwellicious allows buyers to “bookmark” properties they like on MetrolistMLS.com and share them with friends, family and even their real estate agent! Dwellicious works with the most popular social networking sites like Facebook and Twitter. This great new tool is brought to you by the same people who created Lightning. To learn more visit   www.dwellicious.com  and take the video tour describing the service.

The following information is provided by the State of California

Megan’s Law Home

Welcome to the California Department of Justice’s Internet web site, which lists designated registered sex offenders in California.

As a result of a new law, this site will provide you with access to information on more than 63,000 persons required to register in California as sex offenders. Specific home addresses are displayed on more than 33,500 offenders in the California communities; as to these persons, the site displays the last registered address reported by the offender. An additional 30,500 offenders are included on the site with listing by ZIP Code, city, and county. Information on approximately 22,000 other offenders is not included on this site, but is known to law enforcement personnel.

 Click the link below to enter the site.

http://www.meganslaw.ca.gov/

American Recovery and Reinvestment Act of 2009

Homebuyer Tax Credit “ The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.   The credit does not require repayment.   Most of the mechanics of the credit will be the same as under the 2008 rules:   the credit will be claimed on a tax return to reduce the purchaser’s income tax liability.   If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

Get the full story here:

http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home#taxcredit

The Short Sale

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Above is the link direct to the IRS pertaining to short sales. As a seller considering a short sale,

you should always consult with your tax advisor and/or attorney for your specific situation.

If you decide you would like to proceed with a short sale of your home,

call me at 916-684-1062 or 916-730-3029 to schedule an appointment.

Scott M. Ruchek
Keller Williams Realty

 

Mortgage Foregiveness

What is the Mortgage Forgiveness Debt Relief Act of 2007?

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married 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.

What is Cancellation of Debt?

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. 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.

Here™s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

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 debts are more than the fair market value of your total assets.

How do I know if I was insolvent?
You are insolvent when your total debts exceed the total fair market value of all of your assets.   Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts.

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. That is, the lender cannot pursue you personally in case of 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.

The following information is supplied bu HUD

For Your Protection Get a Home Inspection

Why You Need a Home Inspection

Buying a home is one of the most important purchases you will make in your lifetime, so you should be sure that the home you want to buy is in good condition. A home inspection is an evaluation of a home™s condition by a trained expert. During a home inspection, a qualified inspector takes an in-depth and impartial look at the property you plan to buy. The inspector will:

• Evaluate the physical condition: the structure, construction and mechanical systems.
• Identify items that should be repaired or replaced.
• Estimate the remaining useful life of the major systems (such as electrical, plumbing, heating, air conditioning), equipment, structure and finishes.

After the inspection is complete, you will receive a written report of the findings from the home inspector, usually within five to seven days.

This brochure is primarily for homebuyers that buy their homes with the help of the Federal Housing Administration (FHA) mortgage insurance programs. All homebuyers can benefit from the information in this brochure to understand the difference between home inspections and appraisals, the benefits of home inspections, how to find a qualified inspector, and the importance of radon testing.

Home Inspections Are Not Appraisals

A property appraisal is a document that provides an estimate of a property™s market value. Lenders require appraisals on properties prior to loan approval to ensure that the mortgage loan amount is not more than the value of the property. Appraisals are for lenders; home inspections are for buyers.

FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), requires lenders to obtain appraisals of properties securing FHA-insured loans. FHA requires appraisals for three reasons:

• To estimate the market value of the property.
• To make sure that the property meets FHA minimum property requirements/standards (health and safety).
• To make sure that the property is marketable.

The FHA appraisal process will note property deficiencies that are readily observable and found not in compliance with HUD™s minimum property requirements/standards (Handbook 4905.1 REV-1 and Handbook 4910.1). These deficiencies may not be the same as those items noted in a home inspection report.

About FHA Home Inspections

FHA helps individuals and families become homeowners by providing lenders with mortgage insurance for certain loans.

FHA does not guarantee the value or condition of your future home, and FHA does not perform home inspections. If you find problems with your new home after closing, FHA cannot give or lend you money for repairs, nor can it buy the home back from you.

That™s why it is so important for you, the buyer, to get an independent home inspection. Ask a qualified home inspector to thoroughly examine the physical condition of your future home and give you the information you need to make a wise decision.

The Bottom Line: Spending Hundreds May Save Thousands

When you make a written offer on a home, you should insist that the contract state that the offer is contingent on a home inspection conducted by a qualified inspector. You will have to pay for the inspection yourself, but it could keep you from buying a house that will cost you far more in repairs down the road. If you are satisfied with the results of the inspection, then your offer can proceed.

Finding a Qualified Home Inspector

As the homebuyer, it is your responsibility to carefully select a qualified inspector and pay for the inspection.

The following sources may help you find a qualified home inspector:

• State regulatory authorities. Some states require licensing of home inspectors.
• Professional organizations. Professional organizations may require home inspectors to pass tests and meet minimum qualifications before becoming a member.
• Phone book yellow pages. Look under œBuilding Inspection Service or œHome Inspection Service.
• The Internet. Search for œBuilding Inspection Service or œHome Inspection Service.
• Your real estate agent. Most real estate professionals have a list of home inspectors they recommend.

Radon Gas Testing

The U.S. Environmental Protection Agency and the Surgeon General of the United States have recommended that all houses should be tested for radon. For more information on radon testing, call the National Radon Information Line at 1-800-SOS-Radon or 1-800-767-7236. As with a home inspection, if you decide to test for radon, you may do so before signing your contract, or you may do so after signing the contract as long as your contract states the sale of the home depends on your satisfaction with the results of the radon test.

Information Resources

HUD has resources available for information about homebuying and homeownership. You may find the following services helpful.

Internet
www.hud.gov or espanol.hud.gov
HUD™s website contains comprehensive information about home inspections, homebuying, homeownership, selling a home, making home improvements, and other housing-related topics” in English and Spanish.

National Lead Information Clearinghouse
Many homes built before 1978 have lead paint, and some of these have lead hazards. To protect your family, it is recommended that you get a lead-based inspection and/or risk assessment. For more information, contact the National Lead Information Clearinghouse at 1-800-424-LEAD.

HUD-Approved Housing Counseling
HUD supports a network of approved housing counseling agencies that provide counseling services across the nation. For a complete list of HUD-approved agencies in your area, call the toll-free HUD housing counseling referral line 1-800-569-4287 or visit the HUD website at www.hud.gov.

HUD-Approved Lenders
A searchable database of HUD-approved lenders, including banks, mortgage companies, and credit unions, is available on the HUD website at www.hud.gov.

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Welcome to Scott Ruchek’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Elk Grove.