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The real estate downturn of the mid-2000s is mostly over and the market is heating up, with prices rising in all over the U.S. In Wisconsin, the real estate market might be even healthier than in other locales, with new and existing home prices expected to rise 2.4 percent by early 2016. It might just be the perfect time to buy, but before you make any offers, you need to do a little planning to make sure you can pay out over the long run, especially if it's your first home.

Get Your Financial Ducks in a Row

Do you have good credit? Do you know what good credit is or the factors that affect your credit? Have you had late payments, bankruptcies, judgments or other liens? If the answer is yes, the first step is to work on your credit score and report. Up until just recently, access to your credit score and full report was granted after putting down credit card info for a "free trial." that you would have to cancel right away to avoid a costly fee. Now, you can access your score and report for free, so there's no excuse for not knowing what's happening with your finances. Your FICO scores are ordered separately, usually for a nominal fee. Check it for discrepancies or old information. Much of the time you can contact the lender directly to resolve these issues. Or, contact the bureau and use their dispute resolution process. Most mortgage loan programs require a 640 score or higher, so fixing errors or having old information removed can make a big difference.

Do You Have Funds?

Do you have money for a down payment or closing costs? If not, how long will it take you to save? Start now. Make a commitment to stash funds away each month to help you meet your goal. Some loan programs are still available for 0% down but watch out for those; if the market should falter again you don’t want to owe more on the home than it’s worth. It also goes without saying that you want to refrain from big purchases that require credit, such as buying a new car, until after the home purchase process is over.

Are You Homeowner Material?

Owning a home is touted as a big factor in achieving the American dream, but it's not for everyone. Ask yourself:

Am I prepared for expenses like home repairs and landscape maintenance? Am I at risk for job relocation? Am I able to stay in one place for three to five years?

Talk to a Lender First, Not a Realtor

Resist the urge to call your realtor first. Instead, speak with a lender or two to find the best program. There are many loan products and even more lending institutions so it's worth shopping around for the lowest rate. A good lender will also advise you on the best ways to protect your credit while you a preparing to buy a house, which might include ID monitoring and credit report monitoring to ensure that someone else isn't using your good credit or your identity while you working on purchasing your home.

Use a mortgage worksheet to keep track of the information you receive from various lenders. It can be a dizzying amount of numbers and differences so keeping them in one place is important. When you are within 60 days of purchasing, your lender will issue a pre-approval letter for the amount you qualify for. Now you can call your Realtor and look for your dream home.

Ignoring Potentially 21%

In April, 2014, RealtyTrac came out with a report that showed that 1) 9.1 million, or 17% of all US mortgages (total number of US mortgages calculated at over 53.5 million) were STILL seriously underwater, where the loan amount is higher than the property value. Housing values in many areas are coming back, but not enough to put many of the 9.1 million still underwater homeowners into a positive equity position.

In March of 2013, 2) RealtyTrac reported there were 2.2 million past short sellers trying to re-enter the housing market again.

Past short sellers and still underwater homeowners who may have to short sell in the future equate to potentially 21% of the total US residential mortgage market numbers.

The credit of a great majority of those that "have had to or may have to short sell" is proven to be good, with most professing and pr...oving that keeping credit intact is given the highest priority. However, most underwater homeowners have dangerously high back end debt to income ratios as they borrow against everything they've got to stay put, until they cannot any longer. Many are depleting retirement funds and borrowing from other assets to stay solvent.

And the "strategic default" label placed en-masse upon short sellers from 2007-2009 has been proven to be 3) "relatively rare" suggesting that the greatest indicator of default has been unemployment, and that policies designed to promote employment, such as payroll tax cuts, are most likely to stem defaults rather than policies that temporarily modify mortgages.

Short sales are not approved unless a hardship exists, and the majority of those affected will not tell realtors or even their lender of hardship endured unless seriously prodded or required to do so.

Short sellers are saddled with an even bigger problem once they are able to exit their home. There is a credit code problem where past short sale credit shows up as a foreclosure. The foreclosure code is borrowed from the Metro 2 system and the code conflicts in the same raw data, where a narrative of "settled for less than full balance" appears with foreclosure credit code. This credit change occurs when a mortgage holder applies for a short sale and when their mortgage credit goes past 4)120 days delinquent.

On Nov. 16, 2013, the Fannie Mae DU version 9.1 became available and was supposed to allow lenders who were receiving a Refer/Caution( denial) on 5) conventional mortgages because the past short sale was showing as a foreclosure, to go into the Fannie Mae system and make a change. Instead, lenders must be given the OK to make the change first by Fannie Mae in verbiage provided in findings. This only works occasionally, and when the lender receives the OK to go in and make the change, the lender must state "YES" to a foreclosure to finalize.

Further, the problem also exists in Freddie Mac, which was unknown prior because Freddie Mac does not give an automated approval on past short sales until four years past the short sale. We now have cases of Freddie Mac denials of short sales, past the four years, miscoded as a foreclosure.

When we start paying attention to the erroneous foreclosure code that is stopping past short sellers from re-entering the housing market and threatens those who may have to short sell with the same, and address that the "fixes" have problems that need to be corrected, then it may be possible to see a shift in the housing market. 

  1) 9.1 MILLION U.S. RESIDENTIAL PROPERTIES SERIOUSLY UNDERWATER IN FIRST QUARTER, LOWEST LEVEL IN TWO YEARS/April 15, 2014/By RealtyTrac Staff http://www.realtytrac.com/Content/foreclosure-market-report/q1-2014-home-equity-and-underwater-report-8037
2) Boomerang buyers return to market after foreclosure/By Les Christie @CNNMoney March 11, 2013 http://money.cnn.com/2013/03/11/real_estate/foreclosure-homes/
3) UNEMPLOYMENT, NEGATIVE EQUITY, AND STRATEGIC DEFAULT/KRISTOPHER GERARDI, KYLE F. HERKENHOFF, LEE E. OHANIAN, AND PAUL S. WILLEN/WORKING PAPER 2013-4/AUGUST 2013
http://www.frbatlanta.org/documents/pubs/wp/wp1304.pdf
4) The delinquency requirement for a short sale has historically been required by lenders for short sale approval. Recently, lender have NOT been requiring delinquency, or a shortened period such as 31 days, required on an FHA short sale.
5) This was never a problem with FHA and VA mortgages. The Total Scorecard, a secondary automated system, parallels the Fannie Mae Desktop Underwriter/Originator and the Freddie Mac Loan Prospector. FHA and VA mortgages with a past short sale typically receive an approval but with verbiage that discloses there may be a past pre-foreclosure or foreclosure with direction to confirm and adjust per FHA/VA guidelines.

Hello - Thank-you already to this community, as I recently fell apon your site, and this will be my first blog post here !

You can see my entire blog through my portal here !

Having been though this mess several times beginning n the late 2007's, it was pretty clear that we were in for the long hall. 

Now, why is it that most agents steer away from "short Sales"? And even still - How come the perception for the consumer is not there.....at least not in my area. 

My first Short Sale closing happened in 2008, with a property in Southbury, one town south of our home base of Woodbury, CT.

At that time, I must admit, I was not too up on what and how this thing was getting done. But knew the concept behind it all.

So as I leap forward to today with confidence to rally the consumer, and rally our fellow Realtor - to take advantage of this opportunity to help those that need it. 

It is truly amazing, how even today, if a consumer walks into a bank or home, for either a loan or to apply for a rental - and they don't meet there criteria - its ends there. 9 times out of 10. Our local bankers doing there job? Or should we look at each and every consumer and look to do what would be best for them. We can! And I do. As a Licensed NMLS Originator & Branch Manager, it is our duty to do so. 

Short Sale attempt day one - I head up to the home, spend a few hours cleaning and get picture and show ready. Look at the comps, and make an attempt to see just how and what Flag-star will require. So with some help from this community already, I have my Flagstar "guns a blazing" & ready to "get er done".

I am wondering if anyone has ever done a short sale with Teachers Credit Union? It is not a huge branch but they are not small either.

I was told by the mortgage department (since they don't have a loss mitigation dept) that they will not accept an offer for less than $200,000 since their unpaid balance is $230,000. They are not going to entertain any lower value. They also never waive the deficiency.

I am looking for some good news from anyone who has dealt with this particular lender. Maybe even a success story..?

If you are one of the smart homeowners who were involved in mortgage restructuring or a short sale in 2012, tax time is an IMPORTANT season for you. There are tax implications associated with debt cancellation/mortgage forgiveness. For those who have been involved this year, here are instructions and tips from Seattleshortsaleblog on how to take advantage of the Mortgage Forgiveness Debt Relief Act that was extended until 1/1/2014!

Here is an example of your liability if the debt relief act did not get extended or if you do not follow tax instructions posted here: Example: If you owe $150,000 on your home and it sells in a foreclosure auction for $100,000, the amount remaining of $50,000 would be taxable income. If you are in the 25% tax bracket, you will have to pay the IRS $12,500 in taxes on the foreclosure.

The Mortgage Forgiveness Debt Relief act allows you to exclude this income on your taxes but you must take action.

Here are instructions directly derived from the IRS Website. Read the full page HERE

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 this form must be attached to your tax return.

Do I have to complete the entire Form 982?
No. 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.

TIPS For Mortgage Forgiveness from TurboTax: Dealing with incorrect 1099-C forms
If your lender has reduced or eradicated your debt under a short sale or mortgage restructure, it will send you IRS Form 1099-C at the end of the year, showing the amount of the debt forgiven and the fair market value of the property. Review the document carefully and compare it to your own figures. If it contains misstatements, contact the lender and attempt to have it correct the form. If it is not able, or not willing, to do that in a timely manner, recalculate the correct figures and provide the IRS with documentation showing how you arrived at your figures when you file your income tax return.

It is vital to follow these steps after any type of mortgage forgiveness. Please read through these instructions & tips. Also, make sure you are reboosting your credit!

Feel free to contact me at Peter@seattleshortsaleblog.com

Good luck!

Peter

Whether you are dealing or have dealt with a short sale, foreclosure, BK, delinquency on your mortgage payments, or have a number of late payments elsewhere, your credit score is damaged and your finances are most likely in lockstep. However, recovering with bad credit will be difficult as interest rates inflate the cost of living and affect various other facets of your life and naturally you get caught in a downward spiral of poverty.

The best example of this is a home mortgage. Do not even consider pushing for another home without rebuilding your credit prior. The figures below will show you why.

The Ding Of A Delinquent Payment, Short Sale, Foreclosure, and/or Bankruptcy

Take a look at the impact of each situation on your FICO score. As you can see, regardless which consumer type you are, you will have incurred a significant ding on your credit score.

Can You Obtain Credit?

There are great deals out there on the housing market but a big problem these days is the inability for homeowners to obtain credit to finance their home. Large agency investors such as Fannie Mae changed their minimum credit score requirement from 580 to 620. Anything under 620 is considered high risk. Your local bank may require a credit score of up to 660 or higher. The question is, even if you were able to qualify for a mortgage, should you finance with sub-par credit?

A Bad Credit Score Will Cost You!

These figures are based on rates from 9/12/11. The example below clearly shows you how much you will be affected from obtaining a mortgage without an outstanding credit score.

How Can I Quickly Rebuild My Credit Score?

Whatever situation you may be in, the longer you are stuck in a bad credit rut, the more exacerbated your financial situation may get. Here is how to prepare: If you have a low credit score and/or want to prepare your credit situation to qualify for excellent loans for your next home purchase, by the end of this article, talk to a Lexington Law credit specialist. I have personally researched and found them to be the absolute best company to work with in rebuilding credit scores. Here is a direct number provided through the short sale blog for a free consultation: 888-586-6113 or you can apply through their website.

Hope this helps!

Peter

According to the Obama Administration’s October (2012) housing scorecard and “[…]the FHFA housing price index posting its largest annual gain in five years and new home sales at its fastest pace since April 2010” (Erika Poethig, assistant secretary for policy development and research at the Department of Housing and Urban Development) as well as numerous other sources, we can confidently say we have a recovering housing market. Even Warren Buffett, deemed as one of the greatest investors of all time, is bullish on the US housing market recently purchasing multiple real-estate brokerages including Prudential and his partnership with Brookfield Asset Management, a Canadian real-estate investor, to more than double his size of his brokerage business.

Our housing market is rebounding slowly due to various factors such as tight lending practices, fluctuations of supply & demand, and just the general current economic health but it is on its way to recovery. Will your client be ready to secure their next home investment and cease this opportunity?

Clear Capital exposed a sobering point: “Prices are 37.6 percent below the peak. This means a home bought for $200,000 in 2006 would be worth somewhere in the range of $124,800 today.” (source: dsnews.com) Prices were up 4.6% annually in October and as I have stated multiple times in previous articles, prices will not rebound in a U-shape but rather similar to a NIKE symbol. Concurrently, mortgage interest rates have remained at all-time lows with the latest report from Freddie Mac announcing a 15-year fixed-rate at 2.66% and 30-year fixed averaging 3.37%.

The opportunity is there and will be there for some time but are your clients preparing themselves to be able to jump on the bandwagon of nationally appreciating housing values?

A recent report shows that 23 percent of consumer mortgage requests were turned down by banks and I know from several sources around the Washington state that it is increasingly difficult to obtain a loan due to the fact that mortgage rates are so low that they aren’t incentivized to generously hand them out to just anyone.

I'm an agent. How do I prepare my client(future)? If your client had a short sale and got a significant ding on their credit score but want to prepare their credit situation to qualify for loans for their next home purchase, by the end of this article, have them talk to a Lexington Law credit specialist. I have personally researched and found them to be the absolute best company to work with in rebuilding credit scores. Here is a direct number provided through the seattleshortsaleblog for a free consultation: 888-586-6113 or you can apply through their website.

Hope this helps

Peter

Do you have a client walking the fine line between foreclosure and a short sale? They may have several questions regarding their predicament that you might not know the best way to answer. The good news is that’s what we are here for! We have compiled a few key points that should be made to a wavering client regarding their decision to short sale or not.

First, let’s start with the definition of a short sale:

In simple terms, a short sale is a graceful exit from an underwater mortgage. The lender will agree to sell the home for less than what is owed on the mortgage.

Secondly, what are the perceived advantages of a short sale?

1. Credit - If a homeowner decides to short sale instead of foreclose, they can become a homeowner again far quicker.  In fact, updated Fannie Mae guidelines assist homeowners in qualifying for loans just 2 years after their short sale. If a foreclosure is on record, it could take as long as 7 years to purchase again.
2. Short sellers could obtain additional time in the property - During a short sale, the homeowner could have more time to plan for what’s to come. Since the average short sale takes between 60-90 days, there isn’t a rush to immediately find a new residence. With a foreclosure, you could have as little as 30 days.
3. Short Sale Cash at closing / Relocation Assistance – There are many updated government short sale programs available and designed to assist the homeowner in need. Bank of America has recently begun to offer pre-approved homeowners up to $30,000 in assistance. We’ve also had Chase and CITI offer homeowners $12,000 - $30,000 as a cash incentive to the homeowner short selling their property. There is also the HAFA (Home Affordable Foreclosure Alternatives) program that is there to assist qualified homeowners with a relocation assistance of up to $3,000.
4. Mortgage Debt Forgiveness Act– There is the Debt Forgiveness Act of 2007 which may forgive the homeowners of paying the taxes associated with the cancelled debt of selling the property short. This is a question for a Certified Public Accountant.  Click here to see the Mortgage Debt Relief Act of 2007 as described by the Internal Revenue Service (IRS)

Lastly, what could be the perceived disadvantages of a short sale?

1. Credit - If a homeowner decides to take the route of a short sale, their credit score may be impacted due to the late mortgage payments and/or the reporting of the account being paid in less than full. However, it typically won’t be impacted nearly as much as a foreclosure.
2. Mortgage Debt Tax Liability – The seller may be responsible for additional taxes if they choose to short sell. If the lender agrees to the short sale, there may be a liability to pay taxes on the debt forgiven. It is important to speak with a tax attorney or professional regarding this matter.
3. Deficiency Judgments - In some states, the lender may be able to come after the homeowner for the deficiency amount.  In the state of California, for instance, there are Senate Bills that protect California homeowners who decide to short sale their property.  (Senate Bill 931 and Senate Bill 458). Again, it is important to speak with a tax attorney or professional regarding this matter.

At Short Sale Experts INC, we can answer these questions (minus the specific legal or tax questions) plus many more! We are here to help – our name says it all!

888-SHORT-20

Your Credit Score
When you foreclose on a home your credit will be altered for about 5+ years, to say the least. However, when you do a short sale your credit is also affected, but for a much shorter time period and less damage is done. The truth is there is no concrete answer as to how many points it will affect your score. Every person has his or her own FICO and each individual’s score will vary. What I can tell you is the late payments are typically what have the major affect on a borrower’s credit. Most people are usually able to qualify for a new loan and buy a new home within 2 years after a short sale vs. the 5+ years if you were to go into foreclosure. Since everyone is different it’s best to consult with a credit repair-person or your real estate professional in more detail.

FAQ’s
Why don’t I file Bankruptcy?
Short Sale vs. Bankruptcy – When faced with foreclosure many people tend to turn to bankruptcy as an option of solving their problem. Now there is a large difference many of the “professionals” fail to tell you. Filing for bankruptcy will consolidate your debt and can wipe out your liabilities, but it will not save you from having a FORECLOSURE put onto your credit report. Instead, now you will have both a bankruptcy and a foreclosure on your credit. If you plan on eventually turning back your property you WILL STILL HAVE A FORECLOSURE ON YOUR CREDIT REPORT. Trying to conduct a short sale while in bankruptcy can hold up the process, but it is not impossible. It will just take some more paperwork. My best advice is to consult with a great bankruptcy attorney prior to making any decision should you have additional debt you are unable to control besides your property. One key point to keep in mind is if your home is the only debt that is creating an uncontrollable situation for you then a short sale option is most likely your best bet vs. a bankruptcy. If you have other uncontrollable debt then a bankruptcy might also be needed in addition to a short sale. You should consult with a bankruptcy attorney should this be the case.

What do I do after a short sale?
After your short sale, the stress of your housing payment is extinguished and it’s time to get back on track to restoring your credit. Many people will rent for a while until their credit is fixed and then it’s time to get back into another house. With the right team of people working for you, you will be in a new house before you know it.

Mona Salem 310.925.4782 | Michelle Rosca 562.552.9600 | Long Beach Short Sales

Having problems with short selling property or a reverse mortgage in a probate?  Please contact us.

The Mortgage Debt Relief Act of 2007 is set to expire!!

The window is closing rapidly on one of the most important tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners. Time is running out to Short Sale your house. Although the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lenders doesn’t expire until Dec. 31, it’s likely to take every bit of the coming months to persuade your bank to either foreclose or allow you to sell your house for less than it’s worth (Short Sale).

While owners who are struggling to hold onto their homes shouldn’t throw in the towel solely because of the pending tax bite, it is certainly something to consider.

Under the tax code, borrowed money need not be reported as income because you have an obligation to repay. But if the lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists. So, if you owe $250,000 and your lender forgives $50,000 of that debt in a $200,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36 percent, you would owe $18,000 in taxes.

Under the Mortgage Forgiveness Debt Relief Act of 2007, though, taxpayers are allowed to exclude from income the discharge of debt on their principal residence when they do a short sale— at least until 2013.

So when your lender agrees to a short sale, there is no tax on the difference between the selling price and the amount you owe. When your lender forecloses, there is no tax on the canceled debt. Even when you refinance at a lower loan balance, there is no tax on the difference between what you owed on the old loan and what you now owe on the new one.

But unless Congress extends the law — and there is no indication lawmakers are even thinking about that — all residential mortgage debt relief that takes place on or after Jan. 1, 2013, will once again be considered taxable income.

Why worry about this now, Because the timelines on debt forgiveness decisions by lenders are absolutely horrendous.

Of course, each state has a different timeline. But the shortest is 463 days in Minnesota, according to Lender Processing Services. So the tax absolution window may already be closed for foreclosures.

There are no hard-and-fast numbers when it comes to short sales or loan modifications. But they also can be long, drawn-out transactions.

According to a nearly year-old survey by Equi-Trax Asset Solutions, a Santa Barbara, Calif., analytics company, it can take anywhere from four to nine months for underwater borrowers to persuade their lenders to sign off on a deal in which the lender will net less than what the borrower owes (Short Sale).

Eighteen percent of the 600 agents polled said short sales can be closed in less than three months if the stars line up just right. But almost 10 percent said these transactions require more than 10 months to complete.

There are many factors besides a tax break to consider when deciding whether to give up your house. What will a foreclosure or short sale do to your credit score? How long will you be precluded from buying another house? Will the extra income push you into a higher tax bracket? How long will it take before the amount I owe is on par with what is owed? Is it worth being tied down to one property for many years or should I just short sale and be back in the market within 2 years and probably buy more house for way less.

Consequently, as always when it comes to such matters, you should consult a tax professional before making any decisions.

At Trinity Homes & Investments we discuss all available options with our clients before deciding which course of action to take.  Our mission is to find dignified solutions to foreclosure.

No one ever saw it coming!

The Sellers were moot until Escrow/Title discovered a NEW LIEN!!!

"Picture it" Sophia Petrillo, a Golden Girl would say,

except instead of Sicily 1922 - it was San Francisco 2012

- There was pepperoni all over the place! -

https://www.youtube.com/watch?v=9lH9_rbDQF0

You wouldn't have believed it! 

The preliminary title report showed three liens and we jumped over all three hurdles - only to trip a few paces before finishing and closing our latest San Francisco North Panhandle Multi-Unit Short Sale listing this year... (Ask and we'll give you the address - multiple offers no less!)

Like a mine under water, this lien NEVER appeared on the preliminary title or the subsequent preliminary title report issued for the buyer - but lo and behold - the SELLERS went into the title/escrow company to sign final documents and after running their Social Security Number it came up!!! I am always polite to my escrow officers, but even this one taxed little old me! 

It was scramble time as the lien for $4,200 came up, the attorney whose name it was filed under was difficult to find and the entire bill had to either be negotiated or paid before closing in 3 days. Thank goodness we had cooperative sellers who could find some cash! - Guido - I don't know where it came from, on with the story!

Another 11th hour and 55th minute story which gave yours truly a few more grey hairs.

In the end, we received a wonderful commendation from our SELLERS For our professionalism and attentiveness to detail... All I can say is; Thank goodness it's DONE!

Lately it's been raining cats and pepperoni in San Francisco these days, but then it's not Sicily, 1922.

Michael Ackerman and Oliver Burgelman - Zephyr Real Estate

www.PriceSquares.com  www.BuildingTrust4Life.com

415-307-5850 -  415-244-5846

Oliver and Mike are your home grown San Francisco Short Sale 'Busters' -

We can get it DONE!  With or without the pepperoni - We deliver - Just call! 

As the tax credit deadline of contracts signed by April 30th with the close of escrow deadline of June 30th, we are starting to see a lot of questions again about whether or not a buyer in the market now can still take advantage of the Home Buyer tax credit. Here is a post on Trulia bringing up this question.

My understanding according to the IRS website is that a binding contract must be signed by April 30th and bank approval will obviously be needed to close in time for the July 1st deadline.

Has anyone learned of any additional reasons why someone who signs a binding contract in the next two weeks would NOT be able to obtain the credit if bank short sale approval were issued in time for the buyer to close by 7/1/10?