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 Some of you keep asking if the IRS will go after stressed sales homeowners for the
forgiven amount they did not pay via the sale of their home that closed for much less than the mortgage
note. Back in 2010 and reported on our Monday’s MEMO’s we gave you the details on it: a two
(2) year “stay” on that making it to December 31, 2012.
However, the IRS came up with certain restrictions on it (as they always do), and will review
each case independently based on the following and more:
• Amount forgiven vs. amount actually owed on the mortgage
• Value of home regardless of loan amount
• Homeowner tax bracket and other possible assets owned
• Possible taxable “recovery” elsewhere from the homeowner
Again, the IRS’s list is a lot longer but for them the idea is simple: if you are finished, no money,
on the street/rental, no job, on welfare etc your chances of total forgiveness are very high. If you
still own other assets and they see that you can quickly come back up…the IRS will tax the short
sale part of the forgiven loan and the tax will need to get paid. Always refer to your Attorney, CPA,tax specialist.
 On December 28, 2011 the FHA extended its waiver of a rule that prohibits the agency from insuring homes sold within 90 days of their acquisition. The anti-flipping regulation was
designed to prevent activity that could be harmful to neighborhoods.
While the law was created to maintain stability in the housing market, the FHA temporarily
waived it back in 2010, saying a reprieve would allow buyers to acquire HUD-owned properties,
bank-owned properties and private homes for the purpose of improving them and selling them to
revitalize the neighborhoods.
The waiver is set to expire on January 31, 2012; however, it will now be in effect through
December 31, 2012.
“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods
struggling to overcome the possible effects of abandonment and blight,” said Carol Galante,
acting FHA commissioner. “FHA remains a critical source of mortgage financing and stability
and we must make every effort to promote recovery in every possible way we can.”
The waiver is subject to certain restrictions and it stipulates that all qualified transactions must be
at arms-length, meaning parties to the deal cannot be striving to achieve some type of kick-back
or special interest separate from buying and selling of the real estate.
When the sale price of the property is 20% or more above the seller’s acquisition cost, the waiver
will only take effect if the lender meets all criteria and provides documents that justify the price
increase, according to FHA. The waiver only applies to forward mortgages, and is not available
for home equity conversion mortgages.
 Online, on TV or in print it’s all conflicting and contrary: escalating foreclosures, rate of unemployment is up, hard to get a loan on one side; home prices stabilizing, unemployment rate is unchanged, lowest interest rates in decades; just to mention a few. Information and misinformation is going out every day from so many different directions;however, the single most important item to a sure recovery is consumer’s confidence. Until that gets to a higher level we will continue to hang around the very bottom.
Impossible for us to control what is happening on the large economic scale, be aware of it and push for what is best for our industry via NAR, IAR and RPAC through voting/online especially
when asked. On a local scale we have everything we need to succeed and make a change for the
better: us the Realtors, our expertise, knowledge and the complete trust of our clients.
Currently it seems that the banks are doing their best to kill the deals by not making the loans we
need them to close on; their explanation to it all is that more care is necessary in assessing the
borrower’s other compensating factors within their full financial picture. Let’s face it: we do not
need a repeat in the future, near or far, of the past “no doc loans.”
As Realtors we need to explain and bring this message to our clients, let them know in advance
what to expect from their final lender along with requirements and the needed higher credit score
for the lowest possible interest rates. It’s part of our job to educate the consumer, to show them
multiple solutions whenever possible for them to choose from and start rebuilding a strong
confidence level one-by-one. Real estate did it in past recessions and will do it again this time.
 A new law will soon make it easier to transfer residential real estate upon death while avoiding the time and cost of going through probate. Governor Quinn recently signed into law the Illinois Residential Real Property Transfer on Death Instrument Act which takes effect January 1, 2012.
Under the Act, an owner of residential real estate may execute a Transfer on Death Instrument (“TODI”), which allows the property to pass to one or more designated beneficiaries upon the death of the owner. The designated beneficiary could be an individual, corporation, trust, partnership, limited liability company, or a corporation.
The requirements of a TODI are similar to those of a will. The TODI must contain all the elements of a regular deed and also requires two witnesses and a notary. After the TODI is executed by all necessary parties, it must be recorded in the county where it is located. The owner is free to mortgage, sell, lease or deed the property during his or her lifetime. The designated beneficiary has no rights to the property until the owner passes away. If the owner changes his or her mind as to who the designated beneficiary should be, the owner may revoke the TODI by recording a revocation with the county’s recorder of deeds office.
Upon the owner’s death, the beneficiary must appropriately claim the property by signing and recording with the county a Notice of Death Affidavit and a Notice of Acceptance. Once recorded, the beneficiary takes title to the property effective on the date of the owner’s death. If the two documents are not recorded within thirty days after the owner’s death by at least one beneficiary, the personal representative of the owner’s estate may take possession of the property and can place a lien on the property for all reasonable costs and expenses of managing and caring for the property. If the Notice of Death Affidavit and the Notice of Acceptance are not recorded within two years of the owner’s death, the TODI becomes void and the property then passes to the deceased owner’s estate.
Encourage your clients to talk to their estate planning attorneys to see if this new Act would benefit them and their heirs. The minimal cost and time of preparing and recording a TODI could be a favorable way to avoid the costs and time delays of going through probate.
 We are all aware of schemes in short sales from “Flipping” to “Flopping” and many others; now something else for Realtors to worry about: fake short pay letters from lenders. Nothing worse than having written a few contracts with a buyer and have the “good” one fall apart before the closing just because it was a scheme: so much work, time and effort and no payday. Here is a real example to keep in mind.
The seller was in the process of negotiating a short sale with his lender, Bank of America,
through the services of a third-party short sale negotiation company. The buyer was purchasing the property using a private lender and the sale price was $200,000 pending approval from the existing lender.
On June 10, 2011 Bank of America issued their short pay letter approving the sale for $200,000
and the closing was to take place no later than June 27, 2011. As the 27th approached, it was
clear that the buyer and seller were not going to meet this deadline. An extension was asked for
and received for a few more days.
The new lender’s funds came in on June 28th and so did the extension letter from Bank of
America; the new closing date was moved to July 1, 2011. On the morning of June 29, 2011 the
title company worked on getting it all together; company policy mandated the closer to contact
the loss mitigator at B of A to confirm the terms and amount shown on the short pay letter.
Something about the extension letter and the HUD-1 approval received from B of A did not look
right to the title company. First, the communication did not come through www.equator.com
This was unusual since approval letters were delivered using this online system for every B of A
short sale that the title company had closed.
The closer called up the person named on the HUD-1 approval; his name was Vitto Pastor with a
title of “Senior Operations Analyst, Business Operations” …second red flag as it should have
said loss mitigator in order to issue short pay approvals. The closer left a message.
Shortly thereafter a Kenneth Teele, a senior investigator at B of A returned the phone call
advising the closer that Pastor worked for B of A but did not issue the HUD-1 approval letter.
Kenneth went on to explain the HUD-1 approval and short pay letter received by the title
company were fraudulent and, according to the records, the seller had never applied for a short
sale. He also revealed the outstanding loan balance for this loan exceeded one million dollars.
The closer left a message for the seller to call her, stating there was a problem with the short pay
approval. The seller rather than returning the closer’s phone call emailed her instead asking to
send him copies of all signed documents including the short pay letter. The closer did not.
The buyer called to find out about the closing and was told there will not be any closing and the
funds were returned to the buyer’s lender; the third-party negotiation company never answered
the phone calls or emails.
How can Realtors protect themselves and prevent performing a lot of work for no pay? Here are
some very important tips for you to be aware of:
• A straw buyer is someone with good credit who agrees to help someone with bad credit to
obtain a loan. A perpetrator recruits someone to purchase a house in their name, the
straw buyer will not live in the house but will get cash in exchange: know your client(s)
• What items are usually fabricated to induce a lender to approve a loan? Employment
verification, mortgage loan applications and bank statements. Schemes can only succeed
by falsifying a borrower’s financial status by including material misstatements on
documents the lender’s underwriter relies on when evaluating the eligibility of a
borrower. Use caution but dig into the details and look out for red flags.
• Power of Attorney. The most forged document in a real estate transaction; it is the written
authorization to represent or act on another’s behalf in private affairs, business or some
other legal matter. As a result, perpetrators forge names of property owners in order to
sell a property out from under the rightful owner. Be sure that the attorney signs his/her
name on behalf of the client, NOT the client’s signature (forgery). Verify that the power
of attorney matches the attorney.
• Short sale flopping. The perpetrator conceals or provides falsified information to the loan
servicer who in turns uses it to make informed short sale decisions. Often the true identity
of the parties is hidden behind an LLC where its beneficiary changes from the sale to the
purchase only by name while basically remaining the same individual.
• Every item disclosed on the HD-1. Extremely important (besides being the law) that full
disclosure is made of all receipts and disbursements on the HUD-1 Settlement Statement
and material facts to the funding lender. Do question any “paid out of closings” that you
may become aware of.
• Proper identification. It should be issued by a governmental entity and include a physical
description, signature and photograph of the bearer’s. Forged documents are often one of
the many elements in a mortgage fraud scheme. Be sure you are representing the real
buyer(s)/seller(s) and they really are whom you think they are.
• Fraud for profit and fraud for housing. That is how the FBI defines the two fraud
classifications. Fraud for housing usually involves a single loan to buy a home. Fraud for
profit often involves multiple loans and elaborate schemes to gain the ultimate money.
• Industry professionals are the most common in a housing fraud. They are the ones most
familiar with the ins and outs of the loan process; schemes must have the cooperation of
real estate agents (knowingly or not), loan officers, appraisers and settlement agents.
Always be on the lookout and never let your guard down.
Someone will actually call you from this area code and leave you a message along these lines:
“Hey, this is Karen, sorry I missed you – get back to us quickly. I have something important to
tell you.” Then she will repeat a phone number beginning with 809: do not respond, it’s a scam!
AT & T has been sending out emails NOT to ever dial area codes 809, 284 and 876. If you call from the U.S. you will be charged $2,425.00 per minute!
If you call back you will be listening to a very long message (just to keep you on and add minutes to the call). They will tell you that they have important information about a family member who has been ill or tell you that someone has been arrested, died or to let you know you have won a wonderful prize etc. With so many new area codes these days, people unknowingly return these calls by just tapping on the number and not even look at what’s on caller ID.
The 809 area code is located in the Dominican Republic. The charges can quickly become a nightmare since you made the call. Your local and long distance companies will most likely tell you that they are simply providing the billing for the foreign company and you will end up dealing with a foreign company that will argue having done nothing wrong. Nobody needs this kind of very expensive pain.
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 Jerry Taylor and Peter Van Doren had a great article in Forbes that helped me “balance” the ongoing conversation and costs of green energy compared to our current structure; wind, solar and biomass presently constitutes only 3.6% of fuel used to generate electricity in the U.S. How much will it cost to go green? Energy expert Vaclav Smil calculates that achieving that goal in a decade would incur building costs and write-downs on the order of $4 trillion; $2.5 trillion just to build the necessary generators alone. Green energy/economy is old and back in the 13th century it was all they had; it is quite literally the energy of yesterday. Few seem to realize that we abandoned “green” energy centuries ago for five very good reasons. First, green energy is diffuse and it takes a tremendous amount of land and material to harness even a little bit of energy. Jesse Ausubel, at Rockefeller University, calculates that the entire state of Connecticut would need to be devoted to wind turbines to power the city of New York. Second, it is extremely costly. In 2016 President Obama’s own Energy Information Administration estimates that onshore wind (the least expensive of these green energies), will be 80% more expensive than combined cycle, gas-fired electricity. That doesn’t account for the costs associated with the hundreds of billions of dollars worth of new transmission systems that would be necessary to get wind and solar energy which is generally produced far from where consumers/ratepayers happen to live. Third, it is unreliable. The wind doesn’t always blow and the sun doesn’t always shine when the energy is needed. We account for that today by having a lot of coal and natural gas generation on “standby” to fire-up when renewables can’t produce. The cost of maintaining this back up is not even included in the cost estimates for green energy. It’s no wonder the peasants of the Dark Age could not rely upon the vagaries of the weather. Fourth, it is scarce. The wind and sunlight are obviously not scarce but the real estate where those energies are reliably continuous and in economic proximity to ratepayers is scarce. Finally, once the electricity is produced by the sun or wind, it cannot be stored because battery technology is not currently up to the task. Hence, we must immediately “use it or lose it.” Fossil fuels are everything that green energy is not. Approximately 1,000 cubic feet of natural gas (which costs about $4.00) can generate the same amount of electricity as running an average rooftop solar system for 131 days. It is comparatively cheap, reliable, will burn and produce energy whenever you want it and you can store fossil fuels until you need them. The federal government once promised that nuclear energy was on the cusp of being “too cheap to meter.” That was in the 1950s. Sixty-one billion dollars of subsidies and impossible-to-price regulatory preferences later, it’s still the most expensive source of conventional energy on the grid. So much for government promises! The fundamental question that green energy proponents must answer is: if green energy is so inevitable and such a great investment, why do we need to subsidize it? If and when renewable energy makes economic sense, profit-hungry investors will build all that we need for us without government needing to lift a finger. But if it doesn’t make economic sense, all the subsidies in the world won’t change the fact.
 In a new book, Game Plan, to be published and available at the upcoming “Gathering of Eagles” in Denver, Ian Morris, CEO of Market Leader and REAL Trends Editor Steve Murray researched the market for housing sales and consumers and real estate professionals for the next 3-5 years. The goal of the work is to describe how true professionals and those desiring to be at that level, can truly thrive in the markets just ahead. Here are some early conclusions from the real estate professionals interviewed:
1. Unlike in years past, there are few grave threats facing real estate professionals other than their inability to focus on fundamentals of assisting customers and clients. Yes, the Gen X and Millenials think act and live differently than their older peers. However, they still want a place to live and they still retain the desire to have a place of their own.
2. There are no apparent big bad banks or “lions” threatening to take the consumer away from us (as much as there are those who would like to). Consumers still seek to use real estate professionals at roughly the same rate, and at the same terms as their parents.
3. What has changed is that younger purchasers are much more ready to deal directly with the listing agent on a purchase which is putting enormous strains on the duties and activities of listing agents. Much more so since the whole issue of dual agency really never was built for markets where buyer and seller may well be adversarial.
4. What also has changed in ways that are at this time hard to measure are the political, tax, and regulatory changes that may impact the whole view of homeownership. The potential for the dismantling of Federal housing policy which has been slanted towards homeownership, the reduction in the role of Fannie Mae and Freddie Mac, the limitations on the tax deductibility of mortgage interest are all in motion at this time.
5. Brokerage firms and sales professionals will both have to come to grips with the fact that how we sell homes has and will continue to change in fundamental ways. The above is right out of the March issue of REAL Trends that Steve Murray publishes; I have served on various task force projects where Steve Murray was either the chair or a guest. He has my respect and my trust for his findings because he bases them on two main things: hard data and feedback, both from all over the country.
The book “Game Plan” that he co-wrote should be mandatory reading for every Broker and Realtor who is serious about their profession and need to understand what is happening and how to remain successful going forward. He always gives you a full view of the subject, unbiased and straight up, just like we need it.
Two-ears-one-mouth: listen twice more than talking
RISMEDIA had a great article on the subject that I would like to share with you: it’s very interesting and to the point especially for us Realtors. We really need to understand the subtle difference between giving out information and establishing a true relationship with our clients. An ancient Chinese proverb reminds us that “To listen well, is as powerful a means of influence as to talk well.” This kind of advice is a must have and practice for all Realtors. Are we good listeners? If we passed out a questionnaire to our clients, business associates, friends and family how would they rate our listening ability? Their feedback may surprise us as most of us feel we are much better listeners than we actually are.
As poor listeners we tend to confuse the physical act of hearing with the emotional side of just listening. Scripts and our selling routine provide us with a strong tendency of “giving” information, passing of our knowledge and expertise without any thoughts about listening. We are so sure about the process, the nature of the business and what we need to do that we operate on automatic pilot. We forget that by genuinely listening we show more respect, create trust and will develop a great rapport. The only way to improve our listening skills is to practice “active listening” in all of our daily encounters: from the kitchen table to the sales table.
Active listening is all about us making a real effort to hear our client’s words as well as trying to understand the “total” message being sent: both verbally and non-verbally. It requires more than our ears, but also our eyes; we must monitor our client’s body language gestures and look for congruency between words, posture, movement and tone of voice.
Are we able to stay focused on our client or does our mind wander? Once we give him/her our full undivided attention we will basically lay out a foundation of trust along with a very strong rapport. We must train our minds to put aside distracting thoughts; if you catch yourself wandering, get back immediately and refocus your attention to the client. Show that you are listening by using your body language to convey the same message: remember, they could be looking for your body language as well to be sure they are talking to the right Realtor. A simple smile or nod of the head conveys that you’re listening without interrupting your client’s flow of thought.Get in the habit of listening after asking a great probing question: make no assumptions but summarize and seek clarity. Recap with an occasional question or comment on what has been said to let them know you understand the message.
Poor communication increases mistakes, relationships breakdown and opportunities to “get the order” are missed and gone. We can only enhance our professional image by strengthening our relationships which in turn will improve our sales effectiveness.
The IRS recently announced changes to its procedures on filing liens with the hope of assisting taxpayers and small businesses in climbing out of their debt obligations.
In order to understand the impact of these changes and how they will affect your client, it is first necessary to be familiar with how a federal tax lien can affect, and possibly terminate, the sale of one’s property.
A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt. A lien informs the public that the IRS has a claim against all property, and any rights to the property, of the taxpayer. This includes property owned at the time the notice of lien is filed AND any property acquired after the lien is filed. If the IRS places a lien against one of your clients, that lien will show up on title for any property owned by your client, no matter when purchased, until the lien is paid in full.
The new procedures enacted by the IRS focus on assisting taxpayers in paying off federal tax liens faster to minimize the negative impact that these liens have on their financial well-being. The five major changes include:
· Significantly increasing the dollar threshold when liens are generally issued.
The new rules generally prohibit the IRS from filing a lien unless unpaid taxes exceed $10,000 which is double the previous limit. The new dollar amount was aimed at keeping pace with inflation as the previous limit has been in effect since the mid-1980s.
· Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
The IRS will now minimize the damage to taxpayers’ credit scores after their debts have been fully paid. Liens will now be withdrawn after taxes are no longer owed. A “lien withdrawal” wipes out the lien from the taxpayer’s record immediately where a “lien release” leaves it on the record for at least seven years.
· Withdrawing liens in most cases where the taxpayer enters into a Direct Debit Installment Agreement.
For taxpayers who owe $25,000 or less to the IRS, they can enter into a Direct Debit Installment Agreement to pay the balance. In return, the IRS will allow for a lien withdrawal.
· Creating easier access to Installment Agreements for more struggling small business.
Prior to the changes in the IRS rules, only small businesses with under $10,000 in liabilities could participate in a payment program involving Installment Agreements. Now, small businesses with $25,000 or less in unpaid taxes can participate. In order to qualify, the businesses must arrange to make automatic payments from their bank accounts.
· Expanding a streamlined Offer in Compromise program to cover more taxpayers.
An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to make a determination of whether or not to accept the offer. Under the recent changes, the Offer in Compromise program is being expanded to allow taxpayers who make $100,000 or less to participate. In addition, the taxpayers must owe less than $50,000 to the IRS, which is double from the previous limit of $25,000.
Keep in mind that no matter how your client resolves his or her debt obligation with the IRS, in order to avoid a delay at closing, it is important to obtain written documentation from the IRS stating that the debt has been paid off and that the lien no longer affects the specific property that your client is selling.
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I went to a panel a few weeks ago that included a yoga teacher, a celebrity nutritionist, a spiritual healer and a woman who created her own beauty line.
What really stood out to me from that workshop was what the yoga teacher said. A question was asked: How does one stay calm and focused in a busy and intense environment? The yoga teacher replied: Just relax, do yoga and breathe. I was taken aback by this comment, as it doesn’t give the ‘regular’ person the tools to ‘relax’ in a busy environment. Not everyone can do yoga everyday and stay calm. It made me think about someone telling me once, in response to my 3PM sugar craving, to take a few deep breaths, drink some water and the craving will pass – it doesn’t.
So what does one do? Is it possible to stop for a minute and think about what is going on around you, take a deep breath and attempt to stay calm in an intense situation? YES! It is being self-aware of YOU!
Self-Awareness, per Wikipedia, is the awareness that one exists as an individual being. Without self-awareness the self perceives and accepts the thoughts that are occurring to be who the self is. Self-awareness gives one the option or choice to choose thoughts being thought rather than simply thinking the thoughts that are stimulated from the accumulative events leading up to the circumstances of the moment.
So when you find yourself stressed or having a 3PM craving, have self-awareness, stop and think about your choices. Being self-aware doesn’t mean you have a higher power, it just means that you are actually engaging with yourself and your thoughts. Thinking about your next step instead of just taking it.
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Paul N. Paterakis Lake Zurich, Long Grove, Hawthorn Woods, Kildeer Real Estate
Lake Zurich,
IL
More about me…
The Paul Paterakis Power Team-Remax Showcase Homes For Sale
Address: 7159 RFD, Long Grove, IL, 60047
Office Phone: (847) 388-7551
Cell Phone: (847) 366-3455
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