The Mills at Cortez Hill provides the perfect ‘downtown' location without the congestion of other areas of our cities center. Unit #424 faces 7th with views to Balboa Park. Complete with a balcony, underground parking, and very rare additional storage.
I had and interesting call from a potential short sale listing this week. They had been pursuing a loan modification with Countrywide, but Countrwide was not willing to offer them a modification that would work. The Countrywide representative said their next call should be to their 'liquidation department.'
Now i've been dealing pretty exclusively in short sales for over three years, and this 'liquidation department' was a new one to me. I encouraged my potential new client to call and see what they had to say.
"Could it be?" I thought to myself - is Countrywide going to encourage my potential sellers to move forward with the short sale process? Or, are they going to try and prep them for the eminent foreclosure (the notice of default having already been filed).
The next day I received a call from my potential client saying that, indeed, Countrywide said they should immediately list their property for a short sale!
This all comes on the heels of another client, with whom I had been trying to market their property as a short sale. But they put the listing on hold because they felt a 'deed in lieu' might be an option for them. After almost two months of their frustration trying to discuss giving back the property to American Home Mortgage, AHM said they would not accept a deed in lieu - and told my clients they should move forward with a short sale and gave an approved price well under what I would have anticipated.
Yes, some files seem to take forever - and we are beholden to some negotiators and banks who just don't seem to 'get it' or care. But I see a change for the better in getting short sales approved and keeping our clients from foreclosure.
Next week may bring another frustrating file that is denied, one that should have been accepted as a 'win-win' for everyone. But I certainly am going to hang on to glimmers of hope that the lenders are putting forth an effort to make the process easier for everyone involved.
My poor sellers on this Point Loma house were in a bind. Unlike most of my other sellers these days who are upside down, and in need of a short sale - these sellers were not upside down, but they were out of time. The lender had already scheduled the foreclosure sale. With immediate communication with the bank I got the foreclosure sale postponed which bought us time to get this San Diego house sold.
19282 Ramon Trails, Ramona - San Diego County - Sold at $302,000
We got approval on this Wells Fargo file in record time - and the cash buyer closed in less than two weeks. I will say at this point if you give Wells Fargo exactly what they want to review a sale, and you are presenting them with a sale that makes sense, they will approve in record time. I have another Wells Fargo short sale that should close next week. Same situation, I got approval in just days.
Successfully closed another short sale today on a condo in Point Loma! This was a two lender file, American Home Mortgage 1st and Wells Fargo 2nd. Between the two over $100,000 was written off. The buyer ended up getting a good deal, the seller avoided foreclosure. A real win win situation.
This is an amazing opportunity to own over 9 acres of flat useable horse property in Ramona with convenient location close to main road. 3341 Dye Road. Priced at $275,000. Bring all offers, this is a pre-foreclosure.
Last month I wrote about the ability to approach a mortgage lender for a loan modification if you find yourself no longer able to pay your mortgage. But, what if you no longer want to stay in your home - or your lender refuses to modify your loan payments to something you can afford? There are still two options with the potential of saving you from foreclosure.
The first is a ‘deed in lieu of foreclosure.' This, in essence, is asking a lender to take the property back. ‘Asking' is the key word here, because lenders do not have to agree to this proposition. Additionally, a homeowner can't just mail in their keys with a note saying "Dear Bank, I don't want my house anymore, thank you." There is transfer paperwork that must be executed before a lender can legally take back a property. Without this the lender is forced to proceed with foreclosure in order to gain possession and re-sell the property.
When considering a request for a deed in lieu of foreclosure, there is a bank protocol that must be followed. They will want an explanation of why the borrower can no longer afford the property. In addition they will require much of the same income and expense documentation that they require for a loan modification request. While this is a very viable option when there is only one lender, the deed in lieu request becomes more difficult when two lenders are involved. In this case, the second lender will have to agree to take little or no pay off. Without the second's release, even if the first lender is in agreement to take the property back, their hands are tied unless the second agrees.
The second option available when a homeowner finds themselves in a property that they can no longer afford is called a ‘short sale.' A short sale is asking for a lender's permission to sell a property at current market value, even though more is owed than it than its current worth. A short sale can be a lengthy and sometimes frustrating process, but a successful short sale will save a borrowers credit from a foreclosure. A short sale often looks attractive to a lender, especially if foreclosure seems eminent. Foreclosure is a timely and expensive process, and in the end the lender ends up with a property that they don't want and need to sell. Factoring all of the costs, a short sale often provides a better financial outcome for the lender then a foreclosure, even though they may be writing off tens of thousands of dollars.
The majority of lenders will require that there be a contract in hand from a ready, able and qualified buyer before they begin evaluating a short sale request. Their first step will be to order a ‘BPO' (broker's price opinion) or an appraisal. That value opinion, combined with full financial information including; paystubs, bank statements, tax returns and a hardship letter, make up a short sale package. Once all the documentation has been submitted the lender will review the package to see if the offer at hand meets their criteria for short sale acceptance.
While the process itself may like it should move quickly, it rarely does. Bogged down by numerous files, the very best lender will generally take at least 30 days before a decision is made. On average the wait can top 90 days. During that time buyers often lose interest and move on to another property. So, it is advisable to work with a Realtor who specializes in short sales who will work to have back up offers on hand and who will know how to effectively and efficient negotiate with lenders.
Both a deed in lieu of foreclosure and a short sale may have tax and legal ramifications. While the government has stepped in with new laws that assist some property owners, others remain very exposed, so appropriate legal and tax council is advisable before pursuing either option.
The sub-prime mortgage meltdown and turn in the housing market has created the perfect storm that has wreaked havoc, and torn apart the lives of the countless families in its path. Undoubtedly, if this crisis has not affected you at the very least it has affected many people that you know.
With adjusted rate mortgages increasing payments beyond a homeowner's ability to pay, coupled with the poor state of our economy and devalued home prices, it is no doubt that many find themselves in a situation that seems hopeless. Many homeowners incorrectly believe that there are no options for them- but there are.
Immediate lender contact is the key to working out the best solution. With the current rate of foreclosures being the worst in 30 years, the last thing lenders want to do is take back properties in foreclosure. Banks are in the business of lending money, not taking back houses that they will have to re-sell.
All mortgage lenders have a ‘loss mitigation' or ‘workout' department whose sole purpose is to assist homeowners who are in trouble. At their disposal is a myriad of ‘loan modification' tools including their ability adjust your mortgage to a lower rate, or bring your loan current by forgiving late payments by putting them on the back end of your loan. Your lender will ask for recent bank statements, paystubs, a financial worksheet that details your expenses, income and assets, and a letter explaining your ‘hardship.' Be honest, detailed and include everything the lender requires in one package. The omission of one simple item could cause your request to be denied.
Be forewarned: dealing with loss mitigation can be a long and frustrating process. Because of the sheer number of homeowners who are in trouble, in general it can take months for a loan modification request to be addressed. During this time it is not uncommon for paperwork to be lost, or for a file to be transferred to a different negotiator who puts it on the bottom of the pile. Persistent and vigilant follow up calls to your lender are crucial in ensuring your request has not stalled. Also, beware that the person from the mortgage company who is calling to collect late payments probably does not have any information on your workout request. That person's job is to collect money, and in most cases communication between departments is limited at best.
Additionally, with congress passing The Housing and Economic Recovery Act of 2008 on July 23rd lenders may agree to rewrite your existing loan at 90% of its current market value. If you purchased or refinanced between 2005 and 2007 this could be a substantial amount of money that your lender, in effect, writes off. For example, if your current loan balance is $500,000 but your home's value is now only $300,000, your existing lender would re-write your loan in the amount of $270,000. Thanks to the Act, the existing lender will then be able to turn around and sell the loan to an FHA government backed lender. There are restrictions to this program; the loan must be on the home in which you live, you must be paying at least 31% of your gross income on your mortgage, the loan had to have been taken out between 2005 and 2007, and while you do not currently need to be in default on your loan you will need to show that you will no longer be able to afford your payments in the future. This is certainly a great option for homeowners who qualify, and in cases where foreclosure is imminent this could prove to be attractive to the lender. But since this program does not go into effect until October it remains to be seen exactly how willingly banks will react.
I had a great opportunity to speak with an accountant in relation to the tax liability of short sales and foreclosures in respect to the Debt Relief Act of 2007. Here is what I learned:
TAX LIABILITY FROM SHORT SALE AND FORECLOSURES
-What is Cancellation of Debt Income?
-What about the 2007 Tax Payer Relief Act?
-Are there any ways out of having to pay taxes on COD income?
•1.) What is COD Income?
As a general rule, cancellation of indebtedness creates taxable income to the debtor in an amount equal to the difference between the amount due on the obligation and the amount paid by the debtor in consideration for its discharge, or the debt is discharged without the payment of any consideration by the debtor, the entire amount of the obligation is treated as gain.
Regs. 1.61-12
•2.) What is the 2007 Tax Payers Relief Act?
Mortgage Forgiveness Debt Relief Act of 2007 is effective for discharges on or after January 1, 2007 and before January 1, 2010.
•3.) So, how does a taxpayer get out of having to pay Cancellation of Debt Income?!?
•(a.) Bankruptcy Exclusion
Income from discharge of indebtedness is excluded is excluded from gross income if the discharge occurs in a "title 11 case" is defined as a bankruptcy proceeding under title 11 of the United States Code in which the taxpayer is under the jurisdiction of the bankruptcy court and the discharge of indebtedness is granted but the court or is pursuant to a plan approved by the court. This provision applies to all proceedings under title 11, including chapter 7 liquidations and chapter 11 reorganizations.
•(b.) Insolvency Exculsion
Income from discharge of indebtedness is excluded from gross income if the discharge occurs when the taxpayers is insolvent. The insolvency determination is made immediately before the discharge. The term "insolvent" means the excess of liabilities over the fair market value of assets. However, the statutory provision governing this exclusion does not define the term "liabilities." Keep in mind that the US Tax Court has also held that term "assets" includes assets exempt from the claims of creditors under applicable state law. The IRS has taken the position that the debtor's personal residence and other property exempt from the reach of creditors under state law should be taken into account in determining the extent to which the taxpayer is insolvent.
•(c.) Personal Residency Exclusion
In December 2007, Congress enacted the Mortgage Forgiveness Relief Act in order to provide another exclusion from the discharge of indebtedness rules.
Generally, income from discharge of indebtedness is excluded from gross income if the discharge is by reason (in whole or in part) of qualified principal residence indebtedness. In order for this exclusion to apply, the debt must be discharged after January 1, 2007 and before January 1, 2010. For purposes of the exclusion, the term "qualified principal residence indebtedness" means acquisition indebtedness within the meaning of 163(h)(3)(B), except the limitation is raised to $2,000,000 (or $1,000,000 in case of married individuals filing separate returns), with respect to the taxpayer's principal residence.
I am not an accountant, an highly encourage anyone in the position of potential foreclosure or short sale to consult an account and attorney to ensure that that they are protected and taking the right course of action.
Todd Devin Realtor , Real Estate Broker - San Diego
This is true potential at a bargain price - seller paid $430,000 just a year ago - we have the short sale approved at $289,000. Need an immediate buyer to take advantage of this deal on the lowest priced/square foot home in the neighborhood of El Cajon San Diego. Perfect starter home, or even a 'flip' in this market!
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
I had and interesting call from a potential short sale listing this week. They had been pursuing a loan modification with Countrywide, but Countrwide was not willing to offer them a modification that would work. The Countrywide representative said their next call should be to their 'liquidation department.' 
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