Special offer

Taking Scary out of Short Sales

By
Real Estate Agent with Keller Williams Realty
I have been very leary about taking any short sales the past few months.  Not knowing what to tell my clients if they asked a question or even be able to help them with some ideas, before they got to the Notice of Default.  Well, I decided to do something about that and went to one of these many free seminars that everyone seems to be having.  Boy,  Did that help me.  Not only did I start to understand what a short sale was all about, but also realized all that was involved in processing one. I would strongly advise everyone to take one of these seminars.  They give you information on how to help people before that dreaded short sale. They give you information on the steps that need to be taken along with some great insight from their experiences.  Really great on-line resources for just about anything to do with REO's.  So I guess what I'm saying is don't stay out there in the dark, take some classes and learn what this new market is all about.  The worst that could happen is you get a short sale and refer it and get 25%.  That sounds pretty good to me!!!

Comments (1)

Anonymous
What you forgot to Tell-

California forclosure, short sale IRS, loan forgiveness

From  --  http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/06/05/BUGG5D3FNS1.DTL&feed=rss.business

Foreclosure taxes: Suppose your house becomes worth less than you owe, you can't keep up the mortgage payments and the lender forecloses on the property.

You may be liable for two types of taxes: capital gains and cancellation of debt income. The same holds true if you abandon the property or voluntarily turn it over to the lender.

These taxes depend on whether you have a recourse or non-recourse loan.

Non-recourse generally means that if the lender takes over your house, your debt is satisfied and the lender can't go after your other assets, even if the proceeds from the foreclosure sale are less than the debt.

In California, if you take out a loan to buy a house or a building with up to four units and you live in the house or one of the units, the loan is non-recourse.

A recourse loan generally means the borrower is personally liable for repayment. If the lender takes over the house that is worth less than the debt, the lender can go after the borrower's other assets to pay the difference.

A home equity loan or line of credit is a recourse loan. So are consumer loans secured by your house.

In most instances, if you refinance your house, the new loan is a recourse loan, says Michael Pfeifer, a real estate attorney with Pfeifer & Reynolds.

However, Roger Bernhardt, a professor at Golden Gate University School of Law, says there is no California case law that definitively establishes this as fact.

If you borrow money to buy investment property, it is generally a recourse loan unless it was financed by the seller, in which case it is typically a non-recourse loan.

-- Non-recourse loans. If you default on a non-recourse loan, you could be subject to tax on capital gains, but you won't be taxed on the cancellation of debt.

When a lender takes over a property, it's treated as a sale. Your "sales" price is the outstanding debt.

--- 


Advice to homeowners.  Get your Realtor or lawyer to put their claims in writing?  There will be law suits when next years tax bills come due.  

May 04, 2008 07:00 AM
#1