Please, if you are considering a short sale of your home, talk to a real estate attorney or a cpa to determine any tax liabilities or ramifications of the short sale.
In 2007, Congress passed a bill that granted tax relief for home owners who sold their home as a short sale. Homeowners will be exempt from capital gains tax on the amount of debt forgiven by the lender. Read more at http://www.irs.gov/individuals/article/0,,id=179414,00.html
As always, this tax law is complicated and should be intrepreted for you by an accountant or attorney.
The exemption does not apply to investors and/or folks who own second homes.
Wednesday, April 29, 2009
Tuesday, April 28, 2009
Pricing Your Home For A Short Sale
There seems to be much confusion on how to price a home for short sale.
It really is quite simple. A qualified real estate agent should prepare a comparative market analysis (CMA) of your home to determine it's value in today's market. It doesn't matter what the house was purchased for, or how much is owed on the mortgage. The lender is looking to get fair market value, whether it is a short sale or foreclosure.
There should be a disclosure that the price advertised is a short sale and subject to third party or lender approval. There will never be a guarantee that a lender will accept the price that is advertised in the MLS (multiple listing service).
If you are a buyer interested in buying a short sale, you must do some homework (or insist that your real estate agent do the research), since short sale listings are priced all over the board. Simply research recent sales of comparable properties in the neighborhood and base your offer on those sales. That is what the lender will be looking at to determine whether or not they will accept your short sale offer.
It really is quite simple. A qualified real estate agent should prepare a comparative market analysis (CMA) of your home to determine it's value in today's market. It doesn't matter what the house was purchased for, or how much is owed on the mortgage. The lender is looking to get fair market value, whether it is a short sale or foreclosure.
There should be a disclosure that the price advertised is a short sale and subject to third party or lender approval. There will never be a guarantee that a lender will accept the price that is advertised in the MLS (multiple listing service).
If you are a buyer interested in buying a short sale, you must do some homework (or insist that your real estate agent do the research), since short sale listings are priced all over the board. Simply research recent sales of comparable properties in the neighborhood and base your offer on those sales. That is what the lender will be looking at to determine whether or not they will accept your short sale offer.
Sunday, April 26, 2009
A Successful Short Sale!
The key to negotiating a successful short sale is to price the property correctly to obtain an offer the lender is willing to accept. This means the offer must be more finanacially feasible for the lender to accept a short sale rather than foreclosing and selling the property themselves.
Once you get a reasonable offer submit that to the lender with the following information:
Once you get a reasonable offer submit that to the lender with the following information:
- Purchase and Sales Contract
- Prelim HUD-1
- Buyers Pre-Approval Letter or Proof of Funds
- Listing Agreement
- Authorization Form
- Sellers Financial Statement
- Sellers Last Two Pay Stubs
- Sellers Last Two Bank Statements
- Sellers Last Two Years Tax returns
It is important to send a complete package to the lender as opposed to "piece-mealing" it one document at a time.
Also, put the account number on each page. Send the entire package to the second mortgage company if applicable.
Each lender will have certain methods to process the short sale once it is recieved, but the general procedure for short sale approval is the package is reviewed to determine whether the price may be acceptable and completeness of all documentation. It is then sent to another "handler" to order an appraisal or BPO (broker price opinion). Many lenders are requesting 2 BPO's to verify fair market value. If offer falls within acceptable range of fair market value, it is then sent to the "investor" for final approval or counter offer.
Once you recieve an approval, the lender will require closing in 30 days. Most lenders will grant one extension if necessary, but don't count on it.
As I mentioned in my last blog, this process will take approximately 90 days.
Thursday, April 16, 2009
My Favorite Topic, Short Sales!
First of all, what is a short sale?
A short sale is when the owner of a property owes more than what the property is worth. Typically, the owner is in some financial difficulty and is unable to make his/her mortgage payments and unable to sell for enough money to payoff the mortgage(s).
The owner contacts their mortgage companies and asks permission to sell the property for fair market value and have the mortgage company forgive the balance of the loan.
Seems simple enough, doesn't it?
Well, the basic premise is simple, but throw in a couple of realtors, a seller, a buyer, a mortgage company or two, a servicing company, investors and mortgage insurance and a simple solution becomes a very stressful real estate transaction.
Is there anything we can do to streamline a short sale transaction?
Yes and no! The reality that approval of the short sale will probably take a full 90 days in most cases. Once the selling agent, buying agent, seller and buyer understand the time frame, there is much less stress on all parties involved. Constant communication goes a long way here.
In my next post I will talk about the various steps necessary to completing a successful short sale.
A short sale is when the owner of a property owes more than what the property is worth. Typically, the owner is in some financial difficulty and is unable to make his/her mortgage payments and unable to sell for enough money to payoff the mortgage(s).
The owner contacts their mortgage companies and asks permission to sell the property for fair market value and have the mortgage company forgive the balance of the loan.
Seems simple enough, doesn't it?
Well, the basic premise is simple, but throw in a couple of realtors, a seller, a buyer, a mortgage company or two, a servicing company, investors and mortgage insurance and a simple solution becomes a very stressful real estate transaction.
Is there anything we can do to streamline a short sale transaction?
Yes and no! The reality that approval of the short sale will probably take a full 90 days in most cases. Once the selling agent, buying agent, seller and buyer understand the time frame, there is much less stress on all parties involved. Constant communication goes a long way here.
In my next post I will talk about the various steps necessary to completing a successful short sale.
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