Thinking of doing a Short Sale … You may want to get the process started … Heres Why …

Short Sellers motivated by ” IRS Tax Consequences” to close escrow by Dec. 31

The Mortgage Tax Relief Act …eliminating mortgage debt forgiveness expires Dec. 31, 2012.

Currently the tax-relief act allows homeowners to exclude from income (for the sake of tax purposes) primary mortgage debt (1st trust deed) forgiven by their lender.(i.e short sale, short refi , foreclosure or deed in lieu)

After Dec 31., if a lender cancels a home owner’s debt, the IRS requires the  debt be treated (reported) as “general income”…because the duty to repay it no longer exists.

For example: if a homeowner owes $250,000 and the lender forgives $50,000 of that debt, that $50,000 is considered income.

If the homeowner’s combined federal and state marginal tax rate is 36%, the seller would owe $18,000 in taxes.

Note ….when a homeowner refinances their current mortgage to a LOWER loan balance, there is no tax on the difference between what a homeowner owes on the old loan and what a home owners owes on the new loan amount.( because the basis is higher)

However the refinanced loan amount is now a “recourse debt” which may subject the borrower to a future lawsuit for a “deficiency judgment”.

Here are a few of the other important rules the homeowner needs to know:

• The debt-relief law applies only to debt incurred to buy, build or improve a personal residence. (S ave your receipts in case of an audit).

It does not apply to a HELOC used to pay off debts or used as “walking around money”.

• The act does not apply to vacation homes or investment properties.

• The max. amount a homeowner can treat as indebtedness is $2 million, or $1 million if married but filing separately.

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For more Information Please Contact

Nancy Cloward at 949-606-6116 or NancyCloward@me.com.

or

Heather Cloward at 949-228-4523 or HeatherCloward@me.com.

The Cloward Team

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20 Mykonos, Laguna Niguel CA 92677

20 Mykonos, Laguna Niguel CA 92677

PRIDE OF OWNERSHIP HOME. A COMPLETELY REMODELED KITCHEN IS THE JEWEL OF THIS HOME THAT INCLUDES ALL BRAND NEW CABINETS,GRANITE COUNTER TOPS,STAINLESS COOKTOP,DISHWASHER,STAINLESS STEEL OVEN, MICROWAVE AND A NEGOTIABLE FRIG/FREEZER.A NEW HAMPTON BAY CEILING FAN IS IN THE NOOK.LIGHT BEACHWOOD LAMINATED FLOORS ALL THRU-OUT DOWNSTAIRS, NEW CHANDELIER IN THE DINING ROOM,NEW FURNACE,NEW WOODEN FENCE ON BOTH SIDES,THE IN GROUND SPA HAS BEEN UPDATED WITH PEBBLE-TEK. THERE IS A BUILT IN BBQ IN THE BACKYARD AND THE PLAY EQUIPMENT CAN STAY IF THE BUYER SO WISHES.THIS LOVELY HOME IS PART OF MARINA HILLS GREAT RESORT STYLE ASSOCIATION WITH 6 NITE LIT TENNIS COURTS, CLUBHOUSE, HUGE NEARLY OLYMPIC SIZE POOL AND FENCED OFF ADULT SPA.JUST STEPS TO THE SALT CREEK CANYON TRAIL TO THE BEACH.A LOT TO OFFER ESPECIALLY IN THIS PRICE RANGE. 

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19 Killini, Laguna Niguel CA 92677

19 Killini, Laguna Niguel CA 92677

Marina Hills

BANK OWNED home with lots of upgrades. Family room with fireplace, tile floors and custom carpet. Fourth Bedroom is currently configured as a Master Retreat. Lots of privacy; no one behind you! ALL CONTRACTS/OFFERS ARE SUBJECT TO ONEWEST SENIOR MANAGEMENT APPROVAL AND ANY OFFERS OR COUNTER OFFERS BY ONEWEST ARE NOT BINDING UNLESS THE ENTIRE AGREEMENT IS RATIFIED BY ALL PARTIES

For More Info …. Click Here 

“FORECLOSURES TAKE ALMOST A YEAR”

It took lenders about 332 days to complete the process in 2011, up 11.4% from 2010. Defaults and foreclosures are down

 

Notices Of Default

 

2006              5,865

2007              13,786

2008              24,816

2009              29,679

2010              18,909

2011              17,471

 

Foreclosures

 

2006              647

2007              4,160

2008              11,560

2009              8,525

2010              7,907

2011              7,219

 

by: Jeff Collins

“THE TREND HAS FINALLY TURNED IN REAL ESTATE”

It seems like the realtors and the big investors are tied up with each other.”

These properties are disappearing from the market before they’re even on the market. And for the ones that DO make it to the market, the bids I’ve made on Day One – even above asking price – haven’t been accepted.”

It’s anecdotal evidence of what I believe is happening right now. I believe the signals are telling us the housing market is finding its “clearing price” right now…

This is it. This is the bottom. There are plenty of buyers at this moment to match the sellers. The most recent data and the “leading indicators” – tell me the bottom should be in… or very close.

As a leading indicator, something I find interesting is the dramatic rise in home-improvement stocks, like Home Depot and Lowes. Home Depot is now at 10-year highs. When a stock is hitting 10-year highs, whatever was troubling it before is over…
Yesterday, Bloomberg News reported, “Confidence Among U.S. Homebuilders Climbs to Highest Since 2007.”
Bloomberg said, “Confidence among U.S. homebuilders rose in January to the highest level in more than four years as sales and buyer traffic improved… Record-low borrowing costs, a growing population, and reduced prices may drive demand for homes this year…

I could go on… The general picture is that consumer confidence is rebounding. Things are getting less bad.

The official statistics of home prices might not show the recovery yet… because they are always MONTHS old. But I strongly believe the bottom is in, right now. Today.

 

Dr. Steve Sjuggered

“HOME SALES UP 4.2% IN STATE”

Southern California had a record number of investors and second home buyers flood the market.

Short Sales v. Foreclosures

FICO IMPACT IN A SHORT SALE

First, there is no such thing as having a “short sale” on a credit report.  Instead, there will be an item on the credit report stating something to the effect of “Debt settled for less than what was owed.”  This, in itself, is a minor blemish on one’s credit.  The greater impact in a short sale comes from the late payments report by the lender(s) for each month the borrower misses a payment.  Therefore, the quicker the short sale, the fewer missed payments and the less degradation to one’s credit.

In terms of credit after a short sale is complete, many of my clients have reported to me that within six or nine months, their credit scores were back to or near the highest they ever had.  The reason for this is: A) Their personal balance sheets improved immensely once the debt from their home was removed; 2) They kept current on all their other obligations, and; 3) They did not max out credit cards.  The rule of thumb is that if the seller of a short sale conservatively manages their other financial matters, the short sale will have a minimal impact on credit.

With regard to how long the reporting stays on one’s credit, your estimate of two to three years is accurate.  Generally, late payments become less impactful after two years (not considered) and it is possible to have all reporting of the short sale expunged after three years.

FICO IMPACT OF A FORECLOSURE

If the homeowner decides to allow his or her home to go back to the bank, the immediate impact could be (and probably will be) quite severe.  Credit scores will probably drop by hundreds of points, even below the reduced scores they’ve already experienced because of missed payments.   The person’s credit scores will continue to reflect the foreclosure for about the next seven years.  Please understand the difference here between “credit scores” (generally referred to as one’s FICO) and a “credit report.”  Although the person’s credit scores should rebound after seven years or so(assuming all other financial matters are managed well), the person’s “credit report” will always reflect the foreclosure.  This does not go away over time.  This is a very important point because many employers (especially ones having to do with security clearance) have policies that prohibit employing anyone with a foreclosure or bankruptcy on their record.  I actually had a client, who decided not to short sale their home because they figured they could stay in the property longer by delaying the foreclosure, frantically call me once the foreclosure took place because she was immediately dimissed from her job of 11 years (a large insurance firm) because of the foreclosure and her company’s policy.

DEFICIENCY JUDGMENTS

Something else few people consider is if there is a second lien holder on the property and it is foreclosed, that lender has the legal right to pursue the borrower for the full amount AND issue a 1099, which is counted as regular income.  Say the borrower has a second on their home (could be a home equity line of credit) for $250,000.  If the first forecloses, the second loses all their money.  Their recourse is to pursue the borrower (which they will) and let the IRS know they defaulted on a quarter of a million dollars, which the IRS now wants their share of.  This borrower is not only going to have to deal with the collection agency assigned to this, but also the IRS.

In a short sale, law makers (ESPECIALLY in California) have made it easy on the borrowers or choose a short sale over a foreclosure (and the banks prefer it, as well).  If it is a residential property of four units or less (even if it’s an income property) there is almost never going to be a deficiency judgment against borrower (unless there was fraud), even if there is a second, third or fourth lien.  This became law on July 15, 2011 with SB458.  Also, if it is the borrower’s primary residence, and the loss is less than $1 million, there will probably be no income tax issues, either (neither State or Federal), although we ALWAYS suggest they speak to their tax advisors.

Finally, in my experience, people simply feel better about “selling” their home as opposed to being evicted.  It is better for the neighborhood, for their well-being and in just about every other way conceivable.

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For More Information Please Contact Nancy & Heather Cloward

949-606-6116 or 949-228-4523

NancyCloward@me.com or HeatherCloward@me.com

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The Cloward Team

2012 Is Going To Be A Great Year In Real Estate

“2012 HEALTHIER AND LEANER”

“The Orange County housing market is poised to start 2012 with a much healthier and leaner listing inventory, which will ultimately prove to be a catalyst to stronger demand in the lower ranges.” Thomas also crunched some numbers to calculate market time for 8 pricing slices and determined that 5 had a faster market time vs. 2 weeks ago and 7 improved over the last year. Still, homes over a million dollars are three times harder to sell than homes under a million dollars. These properties have a market time of just over 10 months compared to 3 months it takes to sell homes listed under a million.

Jonathan Lansner and Jeff Collins

“Standard & Poor’s positive for 2011 once again”

“The S&P 500 index on Thursday once again reversed course and rose above the level where it was when 2011 began. The Index has bounced in and out of positive territory all week.” It was up 13.8(1.1%) points and the DOW Jones Industrial average rose 135.63 points (1.1%). “Although there are fears about the European crisis that sent markets down Wednesday, investors gave the U.S.  Economy confidence as business activity grew through out November.”

Nathaniel Popper

“PRICIER HOUSING SHOWS SOME LIFE”

Several recent reports show that pricier slices of the market are showing some relative strength

Jonathan Lansner

“HOMEBUILDER SAYS ORDERS ROSE 20%”

Lennar Corp. reported its second profitable in a row.

Jeff Collins

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For More Information Please Contact Nancy & Heather Cloward

949-606-6116 or 949-228-4523

NancyCloward@me.com or HeatherCloward@me.com

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The Cloward Team