Hello everyone, it's been awhile since I've posted anything and to be honest I'm needing my ActiveRain fix.
I wanted to share something with you concerning promissory note requests by lenders as a means to facilitate a short sale. It is becoming more frequent that lenders, mostly in junior position but not always, want a sizable note signed before they will release their lien. Sometimes it reasonable and advantagous to the debtor to take that route, but when the debtor is truely insolvent and has faced a real hardship what do you do?
We had a client with a loan through HSBC who is known for being tough. They insisted on a $54,000 note from the client before they would approve the deal. A lot of people would just sign it with no intention of ever paying it (which I don't advocate) but these folks just couldn't do it. I wrote a letter to the mitigator and her supervisor explaining the true hardship and that these folks wanted to do the right thing, and by signing a note they know they can't afford would be wrong. I asked them to please forgive the debt and allow these people to move on. HSBC responeded with a new approval letter stating it was a full satisfaction with zero balance due.
The moral of this story is to always ask for what you want, and do it in writing so that the people on the other end can have time to digest it. Many times trying to verbally get something like this accomplished is futile. Alway do it in writing and never give up.
I got a call from a Realtor today and he had a question concerning short sales. Let me give you a little insight first. The Realtor I refer to is proficient in short sales and so he has been around the block with how to handle mitigators. His question was, are short sales getting harder? As I relayed to him, times have changed from a month ago, and they continue to change rapidly. It's common place to have junior liens want notes signed, and not small ones. On a HELOC you can count on a note at a large portion of the balance. The government is messin around with Freddie Mae and Mac, who knows what that doing to the guidelines everyone got used to? Its thrown them out the window.
For someone in the Real Estate game you better be of the mind set that change is good and think of new methodolgies to perfect your craft. Too much dwelling on how things used to be and you will soon be out of business.
Short Sales still continue to be a viable way out of a bad situation for most people, however one must be very cautious and open minded when pursuing a resolution.
Stay positive and be creative and you'll be ready to handle your next short sale.
The IRS gives answers to the most commonly asked questions regarding the Mortgage Forgiveness Debt Relief Act of 2007.
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.
What does that mean? Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income.
Does the Mortgage Forgiveness Debt Relief Act of 2007 apply to all forgiven or cancelled debts? No, the Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.
What about refinanced homes? Debt used to refinance your home qualifies for this exclusion, but only up to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified.
Does this provision apply for the 2007 tax year only? It applies to qualified debt forgiven in 2007, 2008 or 2009.
If the forgiven debt is excluded from income, do I have to report it on my tax return? Yes. The amount of debt forgiven must be reported on Form 982 and the Form 982 must be attached to your tax return.
Do I have to complete the entire Form 982? Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.
Where can I get this form? You can download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.
How do I know or find out how much was forgiven? Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.
Can I exclude debt forgiven on my second home, credit card or car loans? Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.
If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision? Yes. The forgiven debt may qualify under the "insolvency" exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent. A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982.
I've had repeated questions from buyers agents and title companies concerning expediting the short sale process because there is a cash buyer. The Short Sale lender doesn't care if you have cash buyer! Most lenders, and "there are always exceptions" are so swamped with short sale files, they are using what I call the "Putting out the hottest fire" method of prioitization. Files with the closest sale dates are being dealt with first and the rest in decending order.
When someone trys to get the lender to break their protocol because you have a buyer with cash, or your seller is going to file bankruptcy, they don't even flinch. Unless you have the ability to reach a very high placed policy maker or decision maker within the lending institution your dealing with, you will be met with the standard answer.....we will get to your file as soon as we can. A lot of lenders are now giving their processors 30 days to respond before they will even allow you to ask for an update.
It's a frustrating process but I see things getting better each day. These defaulted loans cost everyone when a short sale falls apart due to a buyer that just walked. Lenders are scrambling to streamline their systems to limit the lost deals.
Best thing to do is to make sure your buyer is preparred to wait 60 days to get their offer accepted. Respect the lenders system in place that day and be courtious and prompt with your follow up calls. Make sure your follow up conversations are noted correctly in their system. Get them to read back to you what was noted. If the timeline has lapsed and you still can't speak to someone about your file, escalate it to their supervisor.
Short sales are challenging and getting upset won't help. Learn what their rule for the week is and manuver through it professionally.
Frustrations are being felt by many Realtors and buyers alike right now. The banks are very overloaded and under staffed to handle the flood of short sales. One Mitigator I deal with at countrywide is working 430 files at once. As with any business, focusing on your core duties as a Realtor will yield more consist ant results. Core duties being selling Real Estate. When you try to incorporate doing short sales into your daily routine, the administrative nightmare compounds exponentially.
What if you outsource the short sale management and negotiation headaches just as a Dentist outsources the preliminary stuff to a dental hygenist. While you focus on selling properties and helping homeowners, our expert team of negotiators and administrative people will get you the written approvals so you can close escrow.
Whether you use our company or someone else to outsource these short sales to, it will completely revolutionize your Real Estate business. Even for Realtors that consider themselves experts with short sales, the amount of time to complete one is counter productive to your core business.
Take a look at our website and if you would like us to help you realize sizable profits and zero headaches with short sales, give us a call.
PS. We allow free 24/7 access to a live real time web data base so you can follow and track the progress of all your files. Your sellers and buyers will also love being able to see exactly what stage of the process the file is in. No more he said she said junk. (If you allow them access of course)
Frustrations are being felt by many Realtors and buyers alike right now. The banks are very overloaded and under staffed to handle the flood of short sales. One Mitigator I deal with at countrywide is working 430 files at once. As with any business, focusing on your core duties as a Realtor will yield more consist ant results. Core duties being selling Real Estate. When you try to incorporate doing short sales into your daily routine, the administrative nightmare compounds exponentially.
What if you outsource the short sale management and negotiation headaches just as a Dentist outsources the preliminary stuff to a dental hygenist. While you focus on selling properties and helping homeowners, our expert team of negotiators and administrative people will get you the written approvals so you can close escrow.
Whether you use our company or someone else to outsource these short sales to, it will completely revolutionize your Real Estate business. Even for Realtors that consider themselves experts with short sales, the amount of time to complete one is counter productive to your core business.
Take a look at our website and if you would like us to help you realize sizable profits and zero headaches with short sales, give us a call.
PS. We allow free 24/7 access to a live real time web data base so you can follow and track the progress of all your files. Your sellers and buyers will also love being able to see exactly what stage of the process the file is in. No more he said she said junk. (If you allow them access of course)
For those of you Realtors bright enough to use our negotiation service. Yes I said bright enough. Think about it, how can you as a Realtor be effective selling Real Estate when you spend 10, 15, 20 hours doing administrative work on short sales? You can't! The most successful businesses understand the importance of focusing on the core duties that make you money and outsource the rest.
To see some interesting services we can provide take a look at the link provided.
We also incorporate a web based tracking system so you can view whats going on in real time. Never again wonder what stage of the process your deal is in.
For those of you doing short sales, I was told by a Countrywide mitigator that investment homes and second homes will not be getting short sales approved. As with Ocwen, I am wondering what the investors that own these loans are going to do. I'm sure the lenders are ticked off by the number of investment short sales after the debtor has taken all the money out of it, but a short sale is still better than the alternative. Anyone getting the same story?
On a positive note I also heard Countrywide is creating an entire department and adding staffing just for short sales. It's supposed to be up and running by May 1st.
Hey group, I am still in need of Realtors wanting a free listing! We need agents for the following areas. One Orlando property, two properties in North Port, and one in Port Charlotte.
These are listings that require short sales..........However don't start running away just yet.... We are going to make it an offer to good to pass up. WE DO THE NEGOTIATIONS FOR YOU!! You do what you became a Realtor for in the first place....SELL REAL ESTATE!!
We will utilize our negotiation service to help you sell these properties. If your interested in collecting a check where we do most of the work, give us a call. 904-215-2848
Hey gang, just a short note to let everyone know that the lender EMC, more accurately "EMC the servicing company" just accepted and sent an approval letter for one of our DHS clients. I know I know, your saying so what! Well...once they got the file to the mitigator, they told us what the BPO was at and what offer they would accept.Here's how it looked. They had a BPO at $125,000 and said they would accept a $109,000 net. We had a buyer put in an offer at $115,000 with a net to EMC of $101,000 and they took it. Thats an 80% net to EMC, just like the List Price Calculator laid out.
Pretty cool when things work the way they are supposed to. Anyway, the moral of the story is this; Some lenders are getting their act together, speeding up the process and taking large discounts.
Keep the short sales coming and we'll keep getting you approval letters.
Wayne
PS. They paid a full 6% commission and a $425 processing fee. If the discount taken wasn't so deep they would have paid 7%
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.
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