Phoenix Short Sale vs. Foreclosure.
It is consistently being confirmed daily across all mediums that many people still do not understand the pro’s and con’s of a short sale. The Phoenix Short Sale market is growing almost daily and they are in many cases selling in a matter of days. That’s the easy part.
The real trick is sifting through the mounds of paper work, dozens of hours on the phone and hundreds of emails and faxes only to end up with a whole lot if nothing. It is very important that you have a short sale specialist who has done more than a bunch of reading on the subject; they need to know what goes on behind the lines. What is the truth and what is hype when it comes to the negotiators at the banks.
I have heard many stories from many seemingly qualified Realtors who ended up loosing the Short Sale negotiations to Foreclosure and in my opinion some of them could have been avoided others should have never been considered for a short sale in the first place. That is where the inexperience hurts the home owner. If the Realtor new better they would have advised the client to consult a real estate or bankruptcy attorney. Why you ask? Well there are some instances where depending on circumstances, opting for a foreclosure or bankruptcy might be the best thing to do and you need a professional in that field of expertise to help you make that decision. I don’t think a realtor is the person who should be playing with peoples hard earned money and sending them down a long 4 to 6 month path only to end up costing them thousands more in house payments to end up in bankruptcy or foreclosure when it’s all said and done. Nationally the average short sale that actually makes it to the closing table is 1 out of every 3. I think many of these could have been avoided if they had been properly evaluated in the first place.
Please folks, if you don’t have the time to dig into all of the rules of the game of short sales, take care to find someone who can.
Am I an expert? In short, no. But I have aligned myself with the people who are. I am a Realtor. I help clients buy and sell homes. That’s what I’m trained to do and that’s what I do best. I hire the best and most qualified company to evaluate and process my short sales. If it is a good candidate we will get it done if not we are careful to not waste people’s time and money.
I think more realtors need to start understanding that.
Thanks for reading.
Type at you soon,
Sincerely,
Ken Cuellar
Thursday, September 24, 2009
Friday, September 18, 2009
Phoenix Short Sale / Foreclosure Anti Deficiency Laws continued.
We ended our last post feeling a bit unsure of the consequences if a Phoenix home owner where to Foreclose or Short Sale. So lets pick up with that shall we?
Although we did mention that if the loan fell under the category of a Non Purchase Money Mortgage and did not qualify under the Arizona Anti Deficiency Law Statutes, the lender could come after the individual borrower for up to 20 years to recover the deficiency. We did not touch on the subject of potential tax liability. Put simply, in the past if there was a deficiency that was not collected by the lender and it was a forgiven debt to the homeowner, the homeowner would receive a 1099-C from the lender letting the IRS know that this debt was forgiven leaving the homeowner liable for the taxes because it is considered pretty much a gift from the bank.
There have been several changes to this situation one of which is called the The Mortgage Forgiveness Debt Relief Act of 2007 which takes care of some of these issues. The Act only applies to transactions after January 1, 2007, and before January 1, 2010, and permanently removes the debt forgiveness or (gift from the bank) from income if (a) the real property was the principal residence of the taxpayer; (b) the debt was for the purchase, construction or substantial improvement of the foreclosed or short sale property; and (c) the foreclosed or short sale property was the taxpayer’s primary residence for two of the past five years.
Of course this is the short explanation and as always, I would recommend talking with a tax attorney to be sure this Debt Relief Act applies to you.
That's all for now, more to follow.
Thanks for reading,
Ken Cuellar
Although we did mention that if the loan fell under the category of a Non Purchase Money Mortgage and did not qualify under the Arizona Anti Deficiency Law Statutes, the lender could come after the individual borrower for up to 20 years to recover the deficiency. We did not touch on the subject of potential tax liability. Put simply, in the past if there was a deficiency that was not collected by the lender and it was a forgiven debt to the homeowner, the homeowner would receive a 1099-C from the lender letting the IRS know that this debt was forgiven leaving the homeowner liable for the taxes because it is considered pretty much a gift from the bank.
There have been several changes to this situation one of which is called the The Mortgage Forgiveness Debt Relief Act of 2007 which takes care of some of these issues. The Act only applies to transactions after January 1, 2007, and before January 1, 2010, and permanently removes the debt forgiveness or (gift from the bank) from income if (a) the real property was the principal residence of the taxpayer; (b) the debt was for the purchase, construction or substantial improvement of the foreclosed or short sale property; and (c) the foreclosed or short sale property was the taxpayer’s primary residence for two of the past five years.
Of course this is the short explanation and as always, I would recommend talking with a tax attorney to be sure this Debt Relief Act applies to you.
That's all for now, more to follow.
Thanks for reading,
Ken Cuellar
Thursday, September 17, 2009
Beware. Do Anti Deficiency Laws apply to your Mortgage???
If you are considering Foreclosure or Short Sale you have probably heard the term Anti Deficiency State. Yes, here in Arizona we are an Anti Deficiency State, but it is important to consult a qualified Real Estate Attorney. No, not a Real Estate Agent, an Attorney. Shame on any Agent, no matter how qualified as an Agent they are, if they tell a homeowner anything, but get advice from a qualified Real Estate Attorney.
Something to think about.
Is your mortgage a Purchase Money or Non Purchase Money Mortgage? Put simply, did you use the money to buy the home in which the mortgage is attached to? Is this the original mortgage, or did you refinance? Is there a second or Junior Lien on the home?
The list of questions is deep and all should be explored before a homeowner embarks on the path of foreclosure or short sale.
Basically, any money from a loan that was obtained by using the home as collateral, but was not used to actually buy the home, is considered a NON Purchase Money Mortgage, i.e. Home Improvement Loans, Equity Lines of Credit, etc.... If a homeowner forecloses or short sales on a home and there is not enough money to pay off all of the liens against the house, the Junior Liens, or second mortgages will not be wiped clean if they are NON Purchase Money Mortgages and the creditors have the legal right to pursue that money from the homeowner for in many cases up to 20 years if it is written into your original loan documents as such. This is why consulting an experienced Real Estate Attorney is so important.
I believe it is perfectly reasonable for an experienced Real Estate Agent to initially consult with a potential foreclosure or short sale candidate as a first step. A good realtor could eliminate your eligibility with no out of pocket expense. However, if things on the surface look promising for the homeowner to pursue a foreclosure or short sale, the next step is to talk with that Attorney before proceeding on.
While there are many other things to be considered, there are to many to mention in this post so I will be coming back to this subject on future posts. Check back periodically for more updates.
As always, thanks for reading.
Sincerely,
Ken Cuellar
Something to think about.
Is your mortgage a Purchase Money or Non Purchase Money Mortgage? Put simply, did you use the money to buy the home in which the mortgage is attached to? Is this the original mortgage, or did you refinance? Is there a second or Junior Lien on the home?
The list of questions is deep and all should be explored before a homeowner embarks on the path of foreclosure or short sale.
Basically, any money from a loan that was obtained by using the home as collateral, but was not used to actually buy the home, is considered a NON Purchase Money Mortgage, i.e. Home Improvement Loans, Equity Lines of Credit, etc.... If a homeowner forecloses or short sales on a home and there is not enough money to pay off all of the liens against the house, the Junior Liens, or second mortgages will not be wiped clean if they are NON Purchase Money Mortgages and the creditors have the legal right to pursue that money from the homeowner for in many cases up to 20 years if it is written into your original loan documents as such. This is why consulting an experienced Real Estate Attorney is so important.
I believe it is perfectly reasonable for an experienced Real Estate Agent to initially consult with a potential foreclosure or short sale candidate as a first step. A good realtor could eliminate your eligibility with no out of pocket expense. However, if things on the surface look promising for the homeowner to pursue a foreclosure or short sale, the next step is to talk with that Attorney before proceeding on.
While there are many other things to be considered, there are to many to mention in this post so I will be coming back to this subject on future posts. Check back periodically for more updates.
As always, thanks for reading.
Sincerely,
Ken Cuellar
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