Short Seller's Benefit Big on Tax Credit Extention

By
Real Estate Agent with Weichert Realtors 0225104373

Congress just passed, and President Obama is expected to sign, an extention and expansion of the popular First Time Home Buyer's Tax Credit.

The extention would be on homes "ratified" by April 30, and settled by June 30, 2010.  Anyone who hasn't owned a home as a primary residence in the last 3 years, and first time home buyer's would be eligible for up to an $8,000 tax credit.  There are income maximums to qualify.

The expansion of the bill would go to home buyer's who have lived in their current homes for at least 5 years, and are looking to purchase another primary residence.  These buyer's would be eligible for up to a $6,500 tax credit.

This is a big boon to "short seller's", those who owe more on their mortgage then their home's are worth.  Many of these "short sales" are languishing in big bank's loss mitigation department's, as frantic home buyer's and seller's rushed to beat the November 30 deadline.

Now, a temporary sigh of relief can be heard through out Northern Virginia and the nation, as the pressure to perform will at least be lifted for the time being.

However, an "average" short sale can easily take up to 4 months and beyond, after"ratification" or signing and delivery of contract, and it is not uncommon for short seller's who have 2 mortgages with 2 different banks to expect an even longer settlement.

Numerous complaints about big bank foot dragging, was a major reason for the extention and now the feds have stated there will be more of a crack-down on banks deemed to be "out-of-compliance" with current and future reglatory reform.

This bodes well for short seller's, who have a legitimate hardship, such as losing a job, or a reduction in hours, and are struggling with their monthly mortgage payments.  Ideally, a "loan modification" is the best bet if your bank will allow it.

If not a "short sale" could be a solution, albeit not a great one, however it is still better then a "foreclosure" which will remain on your credit for many more years.   

 

Posted by

Johnny Yankoviak

Weichert Realtors

7900 Sudley Road

Manassas, Va 20109

www.JohnnyCuldesac.com

an equal housing opportunity

Comments (3)

Gary & April Greer
Century 21 Wright - Temecula, CA
Real Estate Professionals

I had not thought about the implications, specifically for the short sellers.  Thanks for bringing that to light!  We are a bit bogged down by short sales in our neck of the woods.  The quicker we can get them moved off the books the better.

Nov 07, 2009 10:11 AM
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Definitely the tax credit will be a benefit to short sales, since these seem to be the least desirable types of sales  to buyers.  With all the competition over the bank-owned properties, this should be a welcome relief to agents who have buyers who are not under contract yet, and for buyers, who will still have a chance to get the tax credit. 

Nov 07, 2009 01:05 PM
John Culdesac
Weichert Realtors - Manassas, VA

One of the lesser known reasons for extending and expanding the First Time Home Buyer's Tax Credit was the length of time it takes to settle short sales.

There is no logical reason why it should take a short sale 4-6 months or more to settle.  The big bank's just don't want homeowner's to know that they have options. 

Generally, a loan modification, if the homeowner can qualify, and the terms aren't egregious, is a good way to go for the homeowner who can afford their monthly payments now, but are challenged to make  higher future payments. 

But suppose you are having a real hardship, such as losing your job, or a medical issue, and you are facing the ppossibility of a not making your monthly payments and now  the possibility of foreclosure. 

That's at least when the thought of a short sale should take place, assuming that the seller qualifies.  And yes, for all the seller's out there, a short sale will ding your credit, but not as bad as a foreclosure.

Nov 09, 2009 09:37 AM