Category Archives: Short Sales

Did the recent market shift affect Hitler too?

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This recently discovered (by me) video on YouTube hits a nerve when it comes to how many are affected by the current market dynamics around the country.  I found this a bit funny, if not unnerving, considering how many people I’ve been talking to lately that are in short sale position.  The discussions are because I’m not just acting as an agent but because of my involvement in a real estate investment group that is buying these kinds of properties. 

What I’ve noticed while doing research is that an oddly large number of agents have been hit by the issue of needing to short sell – you’d think that these would be the people prone to seeing the fallacies of some of these loan products and how they’d impact them in a market downturn, but I’m not going to point fingers since I know as independent contractors and small business owners we are tied to these loan products that got misused during the market hey-day.  Even with my own great credit score, I know that today I probably couldn’t qualify for a loan in today’s market because as a business owner, I must go stated income.  I’m thankful that I was able to change my situation before things went nuts in the industry.

If you decide to watch the video, know that my linking to it here is only to provide a bit of levity to a not so fun situation for everyone right now.  I feel blessed that my business is doing so well right now and that many of my choices to downsize last year seemed to be a lucky break ahead of the curve of what is happening to many right now.

Short Sales – Another "Buyer Beware" Aspect

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How does a seller price a short sale listing?

An email from Trulia pointing to a post titled Short Sale Saga, reminded me to write a post on the topic of how a buyer’s offer can be “used” to determine the list price of a short sale property. Back in December of 2007 when I wrote the post “Should You Buy a Short Sale?” , I didn’t touch on this aspect of the various “difficulties” you might expect to encounter, as the buyer of a short sale property. Today, the likelihood that the seller may be USING your offer to determine a list price, would be more commonplace than it was back in December of 2007.  While this may seem inappropriate from the buyer’s perspective, let’s look at the facts.

Say a seller has his home on market at $625,000 and owes $580,000.  The seller doesn’t have to show it as a short sale at that price, as he needs an offer at $575,000 to “clear the table”.  After 90 days on market with no offers, the owner wants to reduce his price, but would have to show it as a short sale.  Does he reduce it to $549,950 or $499,950 or what?  The seller has no idea what the bank is willing to take, and the bank won’t tell the seller until there is an offer on the table to look at.

The minute the seller is forced to say “short sale” of even “possible short sale”, the seller is going to get a lower offer than if he did not have to disclose this information.  The asking price has to be low enough to get an offer, and the price may be “false advertising”, leading the buyer to believe the seller has any info as to what the lender will take.  If the seller reduces the price to current market value, and the buyer offers full price, the buyer will feel duped (as in the Short Sale Saga) into thinking that a full price cash offer should be acceptable.

If a buyer submits an offer of 80% under market value, the seller should accept it.  Why?  Because that offer becomes the means by which the owner learns what the bank is willing to accept.  In the above case, let’s say the seller decides to list the house at $549,950 and the buyer makes a cash offer of $100,000.  The seller should accept it, leave the property on market, submit the $100,000 offer and get an answer from the bank.  The bank rejects the offer and says they will not accept an offer of less than $430,000.  The seller has learned, via the buyer’s offer, that he can list his house at $450,000.  The seller used the buyer’s offer to determine the list price that matches what the lender is willing to accept.

Here’s what I think.  I think all short sales should be listed for $1.00. By doing so, the seller is making a clear statement that he has no idea what the acceptable offer price will be, and the buyer is on notice that the seller can’t provide that information.  Until that time, the only short sales I have seen where the owner and seller’s agent are making any commitment to the asking price, are the ones who used a buyer’s offer to get a price from the bank.

Using the buyer’s offer to determine list price, under the current system, seems to be the only way for the seller to proceed. Many buyers being disappointed by the current system is not acceptable.  Offering the property at $1.00, and letting the buyers decide what to offer (vs. full price of a “fake” list price) seems to be a better alternative to the way we do it now.

Options for Homeowners Facing Foreclosure

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This is Part Two of a series of articles on the foreclosure process.
This article does not constitute legal advice.
Foreclosure laws vary from state to state.

Homeowners in financial distress should always hire legal counsel. Call your local state bar association for a referral.  Reduced or free legal aid may be available in some states. Ask for a referral from the state bar association or through a LOCAL HUD-Approved Housing Counseling Agency.

For homeowners who are facing financial hardship, denial is a warm, safe comfortable place to stay, where tough decisions can’t hurt and the decision-making process is put off one day at a time.  There is FREE help available from your local state non-profit agencies.

Local, HUD-Approved Housing Counseling Agecies received 1.5 million dollars from Washington State when Gov. Gregoire signed SB 6272. State agencies are already whining that they are “overwhelmed”. Hmmm. How much of that 1.5 million dollars was spent hiring and training competent counselors and how much went into executive salaries, high paid consultants and task force meetings?  There are plenty of out-of-work mortgage production people who are (at this point) probably willing to work at non-profit agencies. Put them to work.  Perhaps I am in denial as to the extent of the problem at our state agencies. If so, agencies: please enlighten me and RCG readers.  If the problems are with the banks and their ability to handle the calls, that doesn’t mean we throw more money at the state agencies.  In part five of this series, I will ponder about massive government intervention. For now, we’re left dealing with the problems at hand.

If you are a homeowner reading this article, that means you’re starting to come out of denial.  Maybe a friend or relative forwarded this to you.  Welcome to raincityguide.com  How are you? Don’t say “fine” through tears or clenched teeth.  Not so good, right?  Okay then. Is your financial distress temporary or long term?  THIS is perhaps the most important question you’ll need to answer. This is going to require that you get real with where you are in life.  Long term, permanent financial distress situations are going open up options that might be different for a homeowner who has a short term financial distress problem.  Let’s try to break things down even more.  Long Term: You’ve been laid off and have been unable to find work at your former pay level for along time and you have third party confirmation that the chances of being able to reach that pay level again are very low. Short Term: You’ve been laid off and have been unable to find work at your former pay level but your prospects are good or you’ve recently been re-hired at a similar pay level.

Reinstatement
If you are payment or two behind, which may happen with temporary financial distress, your lender will be thrilled beyond your wildest expectations to accept the total amount owed in a lump sum.  Reinstatement often happens simultaneously with a forbearance agreement.

Forbearance Agreement
Your lender agrees to reduce or suspend your payments for a short period of time.  These two options are good for people whose financial distress situations are temporary.

Repayment Plan
Your lender helps you get “caught up” by allowing you to take missed payments and tack them on to your existing payment each month until you are caught up.

If your financial distress is long term and will permanently affect your ability to continue making your payments:

Consider Selling
With home values going down, if you do have some equity remaining in your home, you may be better off selling NOW rather than waiting until next year when scads of REOs (already foreclosed-upon homes that the lenders must dispose of) will continue to hit the market, driving inventory up and home values down.  If you owe more on your home than what the home can be sold for in today’s market, you have probably already heard of the term Short Sales.  In this case, the lender is asked to reduce the pricipal balance and allow the loan to be paid off in order to facilitate a sale.  Most lenders are not radically motivated to approve short sales unless foreclosure is imminent.  This author does not recommend that you stop making your mortgage payment in order to force the bank to approve your short sale. All homeowners in financial distress should have an attorney holding their hand the entire time.  If you have assets, you do not qualify for a short sale. Short sales are reserved for homeowners with NO MONEY and you will be asked to provide proof that you have no money.  If you have money, this is a different kind of transaction. It’s called “Making Your Downpayment in Arrears” and you’ll be asked to bring that money at closing.  Don’t ask anyone to help you hide your assets. Doing so may constitute mortgage fraud which is now a class B felony in Washington State. I could go on and on about short sales. If you need more education in this area, we’ve covered the topic in these RCG articles:

Short Sales
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Question From Today’s Short Sale Class
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Should You Buy a Short Sale Property?
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Is a Short Sale a Bargain?
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Why Do Banks Take So Long to Approve a Short Sale?

Maybe you would prefer not to sell. Consider taking on a tenant or moving out into more affordable living quarters and renting out your home.

Refinancing is a tough road for homeowners in financial distress. On the one hand, they have been hit by some kind of financial hardship and this typically affects their credit score, which means lender’s rates and fees will be higher.  In addition, tightening underwriting guidelines is something banks do in order to help stop the rising tide of foreclosures. People who hold mortgage loans today might not be able to re-qualify for that same loan if they had to requalify under today’s guidelines.  Income and assets must be fully documented. Find a licensed, local mortgage lender with FHA-approval to see if you might qualify for an FHA loan.  For people who made the conscious decision to state their income higher than reality are out of luck, unless they can prove that they were coached to do so by their lender.  Consult a local attorney for further guidance.  Since refinancing might only be yesterday’s dream for some, Loan Modifications are all the rage in my spam bin. We’ll cover Loan Mods in Part Three.

While doing research for this blog post, I stumbled upon even more money that went from our state government’s rainy day fund, into a state fund to help low to moderate income Washington State homeowners in foreclosure refinance into new loans through the Wash State Housing Finance Commission.  Read more here. I sent an inquiry asking the WSHFC how many WA State Homeowners have been helped this far by this new law and they said, emphasis mine:

Dear Ms. Schlicke:

Thank you for your interest in the Smart Homeownership Choices Program. To date, we have not made a loan to a prospective applicant.  The good news is that when we have talked to the delinquent homebuyers, it seems they have not been able to make contact with their lenders to discuss foreclosure options.  So, we have been able to facilitate getting them to the right person for loan modifications, etc.  There have also been homeowners who have not been pleased with the fact that the assistance is in the form of a loan and not a grant.  They believe the government should be giving them the money to save their home. While we cannot respond positively to these folks, we do send them to one of our homeownership counseling partners to help them with other options that   might be available.

If you know someone who might benefit from the program, please feel free to give them my contact information.

Sincerely,
Dee Taylor
Director, Homeownership Division
Washington State Housing Finance Commission
1000 Second Avenue, Suite 2700
Seattle, WA 98104-1046
(206) 287-4414

Part one: Foreclosure; Losing the American Dream
Part two: Options for Homeowners Facing Foreclosure
Part three: Loan Modifications
Part four: Government Intervention in Foreclosure
Part five: Foreclosure; Letting Go and Rebuilding

Is a "short sale" a bargain?

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Actual info from recently closed short sales:

1) The owner bought it in September of 2005.  They did so many cashout refinances since time of purchase, that I can’t see what the downpayment was at time of purchase.  They tried to sell it for 30% more than they paid for it exactly two years after they bought it (likely due to a 2 year pre-payment penalty) just a month or so into the weak market of late 2007. They moved out and rented it in December of 07.  Then, while it was tenant occupied, they relisted it for sale in February for $50,000 less than their original attempt of 30% more than they paid for it.  They dropped the price an additional $50,000 two weeks later.  They dropped the price an additional $50,000 three weeks after that.  They dropped the price an additional $50,000 five weeks later.  They dropped the price an additional $50,000 three weeks later and dropped another $50,000 five weeks after that.

So $300,000 in price reductions from 30% more than they paid to an asking price that was 13% less than they paid.  BUT then it bid UP to 7% less than they paid for it 2.5 years before.  It either bid up, OR since by this time it was a short sale, the bank may have held out for $50,000 more than the original offer.  At any rate it closed at 7% less than the owners paid for it at 1.12 X assessed value, BUT that was the highest price ever paid in the neighborhood.  The original asking price was 1.5 times assessed value.

The escrow period was 128 days from the time the seller accepted the offer until it closed.

The kicker? A couple of days after this one closed, the neighbor listed their home at 1.08 times assessed value and $50,000 less than the short sale closed at, and it still hasn’t sold.  So the short sale was not necessarily a good buy.  It might have been if it had closed at or less than the final asking price.  But when it closed for $50,000 more than the final asking price it moved from bargain to not a bargain during negotiations and escrow.

Warning: Sometimes seeing $300,000 in price reductions and “short sale” or “foreclosure” at the end, causes buyers to bid UP a property to where it is no longer a bargain.  While I chose this example at random and worked through the history while doing the post and not in advance, it turned out the way many do.  Buyers bid it up or don’t hold their ground when the bank responds to the offer, and 128 days later…not a bargain.

Let’s do another one:

2) Bought in the summer of 2006 with 100% financing for 1.3 times the 2008 assessed value and for double the price the previous owner paid for it in 2004.  Clue.  This person overpaid for it in 2006 and it had the magic words “granite counters”.  Yesterday someone said to me they were going to buy a granite countertop and stick it out on the grass of a vacant lot and sell it for half a million dollars 🙂

Looks like the person who bought it barely (if ever) lived in it, as it was listed for rent within 3 months of closing in 2006.  Apparently someone in 2006 thought paying double what the previous owner paid in 2004 was “an investment”. After renting it out for a year, the owner tried to sell it in the summer of 2007 (before the market turned) for 11% to 12% more than he paid for it.  No takers and it was re-rented.  They dropped the price $15,000 after 125 days on market.  Three months later…still no takers.

They rented it out again and five months later listed it for 20% less than they paid for it.  (Interesting that they listed it for 12% more than they paid for it and then 20% less than they paid for it, without trying anything in between. An agent (not the agent who had it listed and not the same office) bought it immediately as soon as it was listed for 20% less than the current owners paid for it. The short sale escrow lasted 75 days and it closed at the full asking price of 20% less than the owner paid for it in 2006.  The sold price from the short sale was 1.03 times assessed value.

The kicker? The agent who bought it at the bargain price now has it on market for sale or for rent.  Rent price is $1.58 per square foot. Sale price is 1.17 times assessed value.  Would have been a nicer story if the person who got it for 1.03 times assessed value was going to live in it.  Insider gets the bargain and flips it back out on market for a decent price, but not such a bargain.  At least they’re not asking 1.5 times assessed value, but if a nice young family bought it for the bargain price of 1.03 times assessed value, I would have been happier.

I think I’ll go see it this weekend with one of my clients who is in that price range.  Maybe it will sell for less than 1.10 times assessed value.  Not a screaming deal, but worth taking a peek at it.

Moral of the story? Don’t go to an agent and say “I want to buy a foreclosure property” or “I want to buy a short sale”.  We always shake our heads when people do that.  Instead look at properties you like that are in your price range, and if one of them is a bargain, we’ll know it.  Sometimes it’s the foreclosure or short sale, sometimes it isn’t.

I know of another home that was listed for $1.3 million, sold at foreclosure for $800,000 and went back on market at $1.1 million.  No one’s buying it.  So the question remains on this one and the second example above, was it a bargain?  We won’t know until the people who got the bargain and immediately relisted the homes for sale at a higher price, get an offer that sticks.  What we do know is the bargain on those two gets less every day, since both properties are vacant and the owner is paying the carrying costs.

Leave the gun; take the cannoli

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My friend Geno reminded me today that some are in the “leave the gun; take the cannoli” stage of the real estate market.  It also reminded me of the stark differences between 2008 and the last time I participated in this same kind of market, which was in 1990 and 1991.

I remember leaving the gun and taking the cannoli in Yardley, PA. when I was working for one of my two favorite brokers, Frank Mancuso, also one of my two favorite Franks.  I was working with a nice young family, relocating to Yardley from somewhere else, trying to find a good value in a turning market like this one.  We “targeted” a house where the owner had been relocated by his company too.  We truly held a gun to the head of the “relocation company” during initial negotiations, and then picked the carcass clean at time of inspection in a second round of negotiations.

The similarities?  Only those who really wanted to sell, or HAD TO sell, were selling.  The deepest discounts being the vacant houses where the owner had already moved on, and there was no chance the owner would be coming back.

The differences?  The reasons why people “had to” sell.  Tim’s story yesterday reminded me of when Buddy Ryan was canned by the Eagles in 1991 and everyone in the office was wondering who would be selling his house.  Needing to sell your house in a bad market, especially when the vultures perceive that you NEED to sell it, can be an awful place to be.  Still when the sellers are highly paid people or relocation companies, no one’s wasting any tears.  It’s when the carcass to be picked looks like the family depicted below, that you take pause.

Truth is, people trust professionals to NOT let them, or encourage them to do, what will hurt them. So when you take out the gun and put it to someone’s head so that you can leave with the cannoli…at least look them in the eye when you’re doing it.  Maybe talking someone into doing a short sale is like pulling the plug on someone that was just about to be saved.  Think about that before telling people a short sale is their only or best choice.

The only difference between buying a short sale and buying a foreclosure is whose head is at the end of the gun, and whose cannoli will taste better in your mouth after all’s said and done.

Quick snap shot of recent Snohomish Co. Notice of Trustee Sales (foreclosure)

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Spending time at the Snohomish Co.  excise tax and recording office today afforded me the opportunity to pull some records on current Notice of Trustee Sales recorded from Sept. 1, 2008 to today.   There were more than the 36 in my sample before I became restless and bored with basically the same theme that I knew would play out.

All were purchased within the last 4 yrs, most of the sample from 2006, one in 2008.    One was for $3 million in arrears, another for $1.28 million in arrears and even one at $56,000.00   So, foreclosures are affecting all property types and income strata.

Here’s the tally of when the homes were purchased in my quick sample:

2004: 2

2005: 4

2006: 18

2007: 11

2008: 1

Lenders represented (again no surprise):

WaMu, Countrywide (several), Flagstar, First Franklin, AEGIS, Homecomings, GMAC, Indymac, Everhome Mtg, HSBC, EMC, Wells Fargo, First Horizon (now Metlife), Greenpoint and US. Bank.

Side note: Short sales are taking 60-90 days from the sampling we are closing in our office.  It is UNREALISTIC for agents to expect anything sooner.   If it happens sooner then great, but do not expect quick responses.  On Monday, we received approval/clearance on a short sale from a Purchase & Sale agreement signed around from this past JUNE.

It is not terribly efficient to have borrowers lock in interest rates two months prior to receiving short sale approval.  We are seeing this happen.  The downside for the borrowers in this volatile mortgage market speaks for itself.

Killer Views and Dog Poop – Short Sale

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Given prices in the Seattle Area have not dropped to the extent of  most of the Country, people wonder why there are some deep discount short sales here.  Mostly those that have a deep discount are in worse shape than when the current owner purchased them.

Remodels gone bad…very, very bad.  If you know the house below, please don’t mention where it is or the address in the comments.  I can’t “advertise” another agent’s listing, but wanted to give you an idea of what a house looks like that will likely sell for $200,000 -$300,000 less than what is currently owed on it.

Often the work being done is substandard, in this case likely because of all of the beer being consumed while doing the work.

Often you will see a lot of new materials, like the travertine above, but partial and poor installation.  I think there were more broken pieces of travertine strewn about than there were full tiles laid.

Still, the view considerations suggest it may be a worthwhile project for someone, especially an owner occupant, if it sells close enough to lot value.

But rarely does anyone but an investor want the house with Killer Views and piles of dog poop.

Why do banks take so long to approve a short sale?

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This question comes up over and over again from Realtors, homeowners and homebuyers everywhere I go. A one sentence answer doesn’t exist for this question. If you truly want to know the answer to the question, “why” continue reading.  This means you will have to take a step back from your particular emotional situation enough to really listen to what’s being said because everyone wants their deal approved NOW. 

Banks are under no obligation to approve your short sale.  I know what you’re thinking, reader. You’re thinking, “Well if the G.D. bank would just approve my short sale faster, they wouldn’t be losing so much money!”

Let’s start at the beginning. A homeowner is said to be in a short sale situation when he or she owes more than what the home is currently worth, is in default and must sell.  Traditionally, homeowners agreed to pay back the difference between what was owed and the sales price. The short sale seller signed a new, unsecured note at closing and promised to pay back the difference in regular monthly installments.  The only cases where the debt was “forgiven” was for true financial hardship cases where there was absolutely no way the homeowner could ever repay the difference. An example would be the untimely death of one of the breadwinners. But that was then.

In today’s politically charged, loan modifications for all, HoHo, let’s-dump-everything-into-FHA environment, homeowners in a short sale situation today are receiving debt forgivness and even temporary tax exemptions on top of that.  Don’t worry, the rest of us tax payers will pick that up for you.

The first step in figuring out why your short sale is taking so long to be approved is to inquire about whether the homeowner is asking the bank to forgive the difference or if the homeowner is gainfully employed and able to pay back the difference.  This all must be proven and documented to the lender’s satisfaction.  If the homeowner is asking for debt forgiveness, the short sale will take longer to approve if the bank does not have all the required documentation.

Thought question: Why would any lender approve a short sale, especially one that requires debt forgiveness, unless there is proof that foreclosure is imminent? Answer: They won’t.  Lenders have to weigh the costs associated with the short sale proposal against the cost of foreclosure.  If a homeowner has not yet defaulted on their loan, the bank has little motivation to approve the short sale. Why not wait for a better offer to come along?  (Note, homeowners reading this article should always consult with an attorney if you are selling short, in default, or will be in default on your mortgage loan(s).)

All loan servicing departments have processes in place for dealing with short sale approvals.  They may not have fancy computer systems so that everything is automated but maybe that’s a good thing. Look where automated underwriting got us.

Next step: Homeowners must prove that they do not have the money to make up the shortfall. This means sending in copies of all bank statements, tax returns, w-2s, and other supporting documents to verify that the homeowners is financially insolvent. Short sales are reserved for people with NO MONEY. 

Gentle reminder: The new sale must be an arms-length transaction.   Another common problem that lenders must watch for is when the real estate agent on the transaction happens to be the “assigned” buyer on the purchase and sales agreement.  The lender is not going to be thrilled in paying a real estate commission on that kind of transaction. Further, there are plenty of foreclosure rescue scams happening nationwide. Lenders scrutinize short sale offers to look for signs of fraud.  Tanta reminds us:

Is it the job of the Loss Mitigation Department to care about clearing your local RE market? No. Is it their job to care about keeping your buyer wiggling on the hook long enough to get papers signed? No. Is a short sale supposed to be a painless alternative to foreclosure for anyone involved? No. There are no painless alternatives. There shouldn’t be. There cannot be.

Next, everyone who is patiently waiting for the bank to approve the short sale must now realize that once the bank says “okay” to the short sale, there very may be a long list of investors who own pieces of this mortgage loan. Each and every investor will have to give their approval for the short sale.  We enjoyed many years of growth in the real estate industry and the overall economy thanks to the invention of Residential Mortgage Backed Securities.  RMBS made millions of dollars for many people.  The downside to securitizing mortgage loans and then selling off slices of each mortgage to different investors is that when it comes time to tell the investor “you’re going to have to take a haircut” that investor gets to have a say in the matter.

Calling loan servicing and yelling at them over the phone will get you nowhere.

I would like to be first to predict that the next meltdown will be loan servicing.  But perhaps my prediction is so obvious as to not be much of a prediction at all.  How much longer can they sustain this level of stress and pressure, with their current staffing levels, while the banks are facing enormous losses?  Of course when that meltdown happens, I predict our government will step in and mandate harsher regulations on servicers, which will be passed on to the consumer in the form of higher interest rates.

Loan servicing use to offer what it said: “service.”  It was treated as a cost center on a bank’s balance sheet.  Over the past 15 years, servicing became a “profit center” and the highest expense, namely labor, was cut to achieve profit goals.  This is one more lesson in underpricing. The cost of “good” loan servicing in which phones are answered and files processed smoothly, would have cost us all way, way, way more on the retail end, than what we paid. 

Let’s say we could create instant loss mitigation nirvana today.  All phones are answered on the first ring, all short sales are approved with no questions asked, no documentation required, no proof of hardship necessary, no proof of financial insolvency needed, and all Realtors receive their full 6% commission. 

The consequences of not performing due diligence at the loss mit stage are disaster for all of us. Compare this to the current nirvana we just left behind: A world where anyone could get a mortgage loan with no verification of ability to repay, with massive fraud still being uncovered.  We need to do it right this time, and it takes TIME to do proper short sale loss mitigation.

Question from today's short sale class

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Realtor: “Jillayne I have nine short sales going on right now and,”

Jillayne: “Wait a sec, did you say NINE short sales?”

Realtor: “Yes, and here’s my question. One of my clients refinanced her Redmond home and took 89,000 cash out. Then she bought another home in another state with that cash. Now she wants to do a short sale on her home here in Redmond. It looks like she’s going to be short about 100,000. The lender on the Redmond home can’t go after her new home out of state, right?”

Jillayne: “Short sales are for homeowners in financial distress with no assets. The lender being shorted will ask your client to sign a new note/deed of trust in the amount of the shortfall and this new deed of trust will be recorded against your client’s new home.”

Realtor: “Yes, but their home is out of state. The shorted lender can’t do that, can they?”

Jillayne: “Yes, the lender can do that.”

Realtor: “But the home is in another state.”

Jillayne: “Your client is going to have to prove that they do not have any other assets. Just because a piece of real property is not located in Washington state doesn’t mean it’s not an asset. Washington state is not that special.”

Readers, why should lenders just randomly “forgive” the shortfall for all homeowners wishing to sell short? Especially homeowners who took cash-out equity loans to buy other real property. Surely there are some hard luck, true financial distress situations going on nationwide, but this is not one of them.

Besides, I thought homes in Redmond were holding their value.

Reminder: Homeowners selling short and/or in foreclosure should always obtain legal counsel. Google your state bar association to get started.

An Early Holiday Present

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Yesterday, The Mortgage Foregiveness Act of 2007 was passed effectively getting rid of the question, “will I be taxed on a short sale?”

Prior to this action, the forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure was potentially taxable to the borrower. As agents we always have had to warn our clients in short sale positions about the potential of receiving a 1099 from the shorted mortgage lender, thus triggering a potential tax.  In one situation I’m involved in, the potential deficiency is 1 million and the tax hit would have been devastating.

Now however, those owners in that situation, at least until 2009, are having their taxes waived, too (at least up to 35%).  For those in this situation, this is really great news and likely the best holiday present they could hope for.

On their behalf, thank you congress [photopress:applause.jpg,thumb,alignright]