Archive for the ‘Short Sales and Foreclosures’ Category

Short Sale Debt Forgiveness Ends in 2012 –

The debt foregiveness on a short sale was first approved by Congress in 2007 and is scheduled to end in 2012.  Right now under the debt forgiveness act, when a homeowner does a short sale and the lender foregives the portion of the mortgage principal that is not repaid, instead of being treated as taxable income to the borrower, it is forgiven.  The amount of debt forgiven must be reported on form 982 ad must be attached to your tax return. 

According to the Bay State Realtor Magazine (by Stephen Ryan, ESQ – MAR General Counsel)

Five years ago when the number of foreclosures and homes being sold as short sales began to increase, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, which was intended to give homeowners facing distressed property situations some relief.

In a short sale a lender foregives some portion of a borrower’s debt.  The general tax rule that applies to any debt forgiveness is that the amount forgiven is treated as taxable income to the borrower.  Some exceptions to this rule are available but, until 2007, when a lender forgave some portion of a mortgage debt (such as in so-called “short sale” foreclosures and “workouts”), the borrower was required to pay tax on the debt foregiveness.

The law, enacted in December 2007,  provides relief to troubled borrowers when some portion of mortgage debt is forgiven.  That relief expires on December 31, 2012.  While the possibility exists that the law may be extended, as of press time there is no guarantee that this will occur…….

It is important that slllers understand that, if this is not extended, there could be a significant tax liability if the transaction does ot not close on or before December 31, 2012. 

 

Ongoing Education is Important to All Professions – Including Real Estate

Have you ever picked up a business card at an open house or perhaps were handed a business card by a real estate agent and wondered, besides the word “agent,” what do those other letters stand for (REALTOR, CBR, SRES, LMC……).  

Did you know that not all real estate agents are REALTORS?   According to the National Association of Realtors (NAR): “The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics…..REALTORS® are pledged to a strict Code of Ethics and Standards of Practice” that includes all ethical requirements related to working with consumers and fellow agents as well as truth in advertising.

All agents are required to take a specific number of continuing education hours to renew their licenses every 2 years (the number of hours required is dependent on the state in which they are licensed). 

As any professional will tell you, it is important to stay current in your profession, be it a CPA, a Financial Advisor, a Realtor.  Rules change.  New laws are written.

The Real Estate profession is no different.  Agents need to know what the new rules are and how they affect their business and their dealings with with their customers and other agents.  A person with designations after their name has voluntarily made both  a financial investment and a time commitment to take the courses and obtain the designations that show their commitment to clients and their diverse needs (eg SFR – Short Sales and Foreclosure Resource, SRES – Senior Real Estate Specialist, CIAS – Certified Investor Agent Specialist, CBR – Certified Buyers Representative). 

Joan Parcewski, Realtor & Notary

GRI (Graduate Realty Institute), CBR (Certified Buyers Representative), SFR (Short Sales & Foreclosure Resource), LMC (Loss Mitigation Certified), CDPE (Certified Distressed Property Expert), SRES (Senior Real Estate Specialist), CIAS (Certified Investor Agent Specialist), & GREEN

YOU are my Top Priority. I believe that ongoing Education as well as Experience are important components of success both personally and professionally.  Let’s work together to implement the most current strategies to make YOU successful in your real estate journey, while building a lifetime relationship.   

Incentive Payments and Short Sales – Reprint from Lowell Sun 3/10/2012

James Haroutunian writes a column for the Lowell Sun.  This is great information about the ever changing short sale market. 

Last week I discovered the holy grail in the world of short sales: My office performed a short-sale closing where the lender paid a $20,000 incentive payment to the seller. That’s right, the seller got out from her loan and got paid for it at the same time.

Industry rumors rang in the new year, as lenders indicated 2012 would be a big year for short sales. High foreclosure volume in hard-hit states such as Florida motivate lenders to use the collaborative process as an alternative to legal action. Some lenders claimed to begin using incentive payments in 2011, though infrequently.

Last week, I bore witness to this phenomenon, as a very happy seller walked away from her mortgage with $20,000 cash. The lender further agreed to waive any deficiency obligation by the seller.

Will this become the norm with short sales? Local real-estate agents are hopeful incentive payments will continue because they will help clear housing inventory. But they remain skeptical it will actually happen.

USA Today reports the following major lenders providing certain programs:

* JPMorgan Chase went national with short-sale incentive offers last year, paying up to $35,000 in some cases.

* Bank of America is testing incentives from $5,000 to $25,000 in Florida to see if it should be expanded to more states.

* Wells Fargo’s incentive offers range from less than $3,000 to $20,000, according to a company spokesman.

Attorney James Haroutunian practice includes real-estate and estate planning law. Contact him with questions at the Haroutunian Law Office at 630 Boston Road, Billerica, 978-671-0711 or email at james@hlawoffice.com.
Read more: http://www.lowellsun.com/rss/ci_20145775#ixzz1rRjluVhM

Incentive Payments for Short Sales?? – Reprint from Lowell Sun 3/10/12

Saturday’s Lowell Sun article (www.lowellsun.com) by Attorney James Haroutunian tells us about possible changes on how the banks handle short sales and their clients.

Incentive payments becoming part of some short-sale deals

 

Last week I discovered the holy grail in the world of short sales: My office performed a short-sale closing where the lender paid a $20,000 incentive payment to the seller. That’s right, the seller got out from her loan and got paid for it at the same time.

Industry rumors rang in the new year, as lenders indicated 2012 would be a big year for short sales. High foreclosure volume in hard-hit states such as Florida motivate lenders to use the collaborative process as an alternative to legal action. Some lenders claimed to begin using incentive payments in 2011, though infrequently.

Last week, I bore witness to this phenomenon, as a very happy seller walked away from her mortgage with $20,000 cash. The lender further agreed to waive any deficiency obligation by the seller.

Will this become the norm with short sales? Local real-estate agents are hopeful incentive payments will continue because they will help clear housing inventory. But they remain skeptical it will actually happen.

USA Today reports the following major lenders providing certain programs:

* JPMorgan Chase went national with short-sale incentive offers last year, paying up to $35,000 in some cases.

* Bank of America is testing incentives from $5,000 to $25,000 in Florida to see if it should be expanded to more states.

* Wells Fargo’s incentive offers range from less than $3,000 to $20,000, according to a company spokesman.

James Haroutunian Law Office at 630 Boston Road, Billerica, 978-671-0711 or email at james@hlawoffice.com.

 

10 Things To Know About Mortgage Debt Forgiveness – A Reprint from Inman News 3/7/2012

This article was written by Stephen Fishman who is a tax expert, attorney and author who has published 18 books, including “Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants,” “Deduct It,” “Working as an Independent Contractor,” and “Working with Independent Contractors.” 

Anyone who has gone through foreclosure, refinancing or shortsales or will be should read this. 

10 things to know about mortgage debt forgiveness

 

Over the past several years, millions of homeowners have had billions of dollars in mortgage debt forgiven, either through foreclosure, refinancing or short sales. It’s important for real estate professionals and homeowners to understand that mortgage debt forgiveness has significant tax consequences.

Here are 10 things the Internal Revenue Service says you should know about mortgage debt forgiveness:

1. Normally, when a lender forgives a debt — that is, relieves the borrower from having to pay it back — the amount of the debt is taxable income to the borrower. Thus, a homeowner who had $100,000 in mortgage debt forgiven through a short sale would have to pay income tax on that $100,000, as an example.

Fortunately, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from your taxable income up to $2 million of debt forgiven on your principal residence from 2007 through 2012. This means you don’t have to pay income tax on the forgiven debt.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude from your taxable income debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. The Mortgage Forgiveness Debt Relief Act applies to home improvement mortgages you take out to substantially improve your principal residence — that is, they also qualify for the exclusion.

6. Second or third mortgages you used for purposes other than home improvement — for example, to pay off credit card debt — do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness , and attach it to your federal income tax return for the tax year in which the debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax-relief provision. In some cases, however, other tax-relief provisions — such as bankruptcy — may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated, you normally will receive a year-end statement, Form 1099-C: Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

The IRS has created a highly useful Interactive Tax Assistant on its website that you can use to determine if your canceled debt is taxable. The tax assistant tool takes you through a series of questions and provides you with responses to tax law questions.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, see IRS Publication 4681: Canceled Debts, Foreclosures, Repossessions and Abandonments. You can get it from the IRS website at irs.gov.


How Important is Owner’s Title Insurance?

THE FOLLOWING ARTICLE IS A REPRINT FROM OCTOBER 22, 2011 IN THE LOWELL SUN written by Attorney James Haroutunian (Billerica MA).  With the spring market already off and running and with so many foreclosures out there, this is a reminder to ALL buyers to consider purchasing owner’s title insurance as par t of the closing process on your new home. 

———-

A new chapter unfolds in the foreclosure saga

This week, the commonwealth’s highest court substantiated the long-term negative effect of a defective foreclosure on subsequent owners.

 

Last year, the infamous Ibanez-case ruling identified why foreclosures can be defective if a lender forecloses without proper documentation proving its ownership at the time. This week, the Supreme Judicial Court applied that ruling against a subsequent buyer of a defectively foreclosed property. The ruling effectively stated the new owner’s title is null and void, despite his paying for and improving the property.

 

These are amazing times in property-law history. The Bevilacqua case sets a new precedent for owners seeking proper channels to prove their title through Massachusetts Land Court. Yes, there is a Land Court, which deals primarily with land legal issues.

 

One method the Land Court offers is a lawsuit to “try title.” This action is brought against known or unknown potential adversary parties who may claim to own your land.

 

The tool provides everyone in the world an opportunity to step forward and fight for a claim to your title. Most cases result in default plaintiff victories, when nobody appears to challenge ownership. However, plaintiffs must first prove they own the property.

 

In Bevilacqua, the court ruled the plaintiff had no standing to file the case (i.e., no ownership of the property he paid for), due to a defective foreclosure in its title history. This new case proves a practical effect to the Ibanez ruling. Other big cases are in the court’s pipeline, which will hopefully soon direct the method by which Bevilacqua can clear the title to his property.

.

In the meantime, remember to buy owner’s title insurance when you purchase (or maybe even when you refinance). Take advantage of the protection title insurance provides.

 

THE COST FOR PURCHASING OWNER’S INSURANCE IS MINIMAL COMPARED TO WHAT MIGHT HAPPEN IF YOU DON’T HAVE IT.

Top 3 Ways to Turn a Seller Off – A Reprint

This reprint comes from Trulia.com.  It is right on when it comes to buyers. 

Buying and selling a home is a very personal and very emotional time – both from the perspective of the buyer and the seller.   Buyers – you really want to buy this house – make the best possible deal, get the most for your money.  Sellers – you want to seell this house –  make the most profit, get the most you can for all you have invested both financially and emotionally.  And keep in mind there is a market out there of similar homes that help both sides determine what is a fair price – Ultimately the price of each home sold in a neighborhood affects the market value price of the rest of the homes.  This is why foreclosures and short sales have an effect on other home values around them. 

———————————————-

Buyers, if you want a home’s seller to play ball, best practice is to avoid these 3 pitfalls:

1. Unjustified, extreme lowball offers: It’s no secret that buyers have the upper hand in many markets right now. (To be clear, I said ‘many’ – not ‘every’ – your agent can help you understand what the dynamics are in your market.) But let’s be realistic, here. No seller can afford to give away their home at a price far below what it’s worth on today’s market. Lowballing a seller at a price far below the recent sales prices of similar homes in the neighborhood on the ‘let’s-take-a-stab’ plan, is highly likely to turn them off.  And that, in turn, will cause the seller to view your offer – and you – as disrespectful and wasteful of their time. Not only will they turn down your offer, but they may not even bother with a counteroffer, rendering your efforts at securing that particular home dead in the water. Buyers: Review the recent sale prices of similar homes in the neighborhood (aka “comps”) with your agent before you make your offer. Also, ask them to help you factor in other market data, like the average list price-to-sale price ratio and the average number of days neighborhood homes stay on the market. It’s all right to come in lower than asking, if the market data supports such an offer; just be sure your offer is based on reality – and not your fantastical hallucination about scoring the bargain of the millennium.

2. Buyer-side mortgage fails: Plenty of employed buyers with decent credit and cash in the bank have been turned down for a mortgage these past few years. That means buyers can’t assume (a) that they’ll be approved for the amount of loan they need to buy the house they want, or (b) that they’ll be approved for a loan at all. Your inability to get approved for a home loan can create all sorts of problems not just for you, but also for your home’s seller. The average seller’s  worst case scenario is that  they accept your offer only to find out a few weeks, or months, later that you can’t get the loan you need to close the deal. Buyers: It’s not overkill to start working with a mortgage professional as far as six months or a year in advance of starting your house hunt to get pre-approved for a loan. Make sure you get a clear understanding of the amount you qualify for, then work with your real estate agent from there to determine the price range you should house hunt in. And whatever you do – don’t buy a new car, open new credit cards or even change your line of work before your escrow closes, unless you consult closely with your mortgage professional before you make that move. Tip for Sellers: Work with your agent to vet buyers before you sign a contract. Factor in their down payment and earnest money deposit, and feel free to counteroffer these items, not just the offer price. It’s not overkill to have your agent contact the buyer’s mortgage broker to see how reliable the buyer’s pre-approval really is.

3. Bashing the seller’s home: Home bashing happens when buyers start bad-mouthing (aka “trash talking”) the place and/or the neighborhood in hopes of getting a lower asking price. Examples: pointing out all the foreclosures in the area, saying the house down the street just sold for much lower than the asking price on this house, saying you’ll need to rip out the entire kitchen before you even consider moving in – saying any of these things to a seller who happens to be at home during the showing or the inspection is probably one of the fastest ways to turn them all the way off. Buyers: Bad-mouthing a house or neighborhood won’t work to get you a lower price. Instead, it only serves to irritate the seller and motivate them to come up with all sorts of reasons why they shouldn’t sell their home to you! Remember: homes hold incredible emotional experiences for owners. Make an offer you’re comfortable with and keep the negative comments to yourself. If there are legitimate, factual reasons underlying your decision to make an offer at a price the seller might see as a lowball, ask your agent to respectfully communicate those facts to the seller’s agent.

A Realtor will help you not make these mistakes.  Listen to their advice. 

%d bloggers like this: