For the longest time, Uncle Sam has considered that any money a homeowner gets from a second mortgage - that isn't paid back to the lending agency - is taxable income. That means, if you default on your home loan - and also never pay the 2nd mortgage - you face getting a tax bill from the IRS asking for income tax to be paid on the amount of money that you received from the second mortgage.
Now the federal government is considering relieving that extra IRS penalty for distressed homeowners. That's good news since short selling is often the most efficient way for a distressed homeowner to relieve themselves of their fiscal problems.
Wednesday, October 3, 2007
Saved a homeowner from foreclosure this week and got a great deal for a homebuyer!
This week we closed on the sale of a home that was just 30 days away from bank foreclosure!
It felt like a marathon, because there were so many aspects of the deal that had to be navigated. But it's finally over, and we now have a happy seller, AND a happy buyer.
If you're a homeowner and you're facing foreclosure - there are solutions, but they all depend on communicating with your lenders and with your realtor.I f you're already trying to sell your home, and haven't had any buyers at the price you're asking - there are options to reduce your asking price to "short sale" the property. This is a process where a buyer can offer less than the amount that is owed - and the bank's approve or counteroffer the buyer's offer. This will only be considered by the lien-holders if you have already been missing or late on your home payments. If successful you are released from your obligations, and you will not have a foreclosure on your credit record - most financial institutions record only the late or missed payments.
If you're a buyer there are a world of great deals available if you search for pre-foreclosure homes. In the deal that I recently closed - the buyer got a home for $50,000 less than comparable homes in the neighborhood are selling for!
It felt like a marathon, because there were so many aspects of the deal that had to be navigated. But it's finally over, and we now have a happy seller, AND a happy buyer.
If you're a homeowner and you're facing foreclosure - there are solutions, but they all depend on communicating with your lenders and with your realtor.I f you're already trying to sell your home, and haven't had any buyers at the price you're asking - there are options to reduce your asking price to "short sale" the property. This is a process where a buyer can offer less than the amount that is owed - and the bank's approve or counteroffer the buyer's offer. This will only be considered by the lien-holders if you have already been missing or late on your home payments. If successful you are released from your obligations, and you will not have a foreclosure on your credit record - most financial institutions record only the late or missed payments.
If you're a buyer there are a world of great deals available if you search for pre-foreclosure homes. In the deal that I recently closed - the buyer got a home for $50,000 less than comparable homes in the neighborhood are selling for!
Tuesday, October 2, 2007
How to buy a pre-foreclosure home...
Everyday there are more homes advertised as "Pre-Foreclosure" bargains! These are generally situations where sellers are trying to get a purchase offer that covers all or most of the amount that they owe the banks on their property liens. And they're trying to make this happen before the banks initiate the foreclosure process.
I recently participated in the "short sale" of a home in MetroWest Orlando. The buyer made an offer of $150,000 on a property that had mortgages totalling around $210,000. I presented the offers to the two banks for their responses.
The first bank held an FHA loan that required complete payoff - which was $123,000. The second bank said they would accept 25% of what they were owed, which with closing costs made a purchase offer of $157,000 necessary.
The buyer added $7000 to his original offer, and closed on the property last week! He has immediate equity in the home as the comparables are selling at no less than $200,000 and the appraisal came in at $210,000!!
The seller was happy as he avoided a foreclosure on his credit record!
I recently participated in the "short sale" of a home in MetroWest Orlando. The buyer made an offer of $150,000 on a property that had mortgages totalling around $210,000. I presented the offers to the two banks for their responses.
The first bank held an FHA loan that required complete payoff - which was $123,000. The second bank said they would accept 25% of what they were owed, which with closing costs made a purchase offer of $157,000 necessary.
The buyer added $7000 to his original offer, and closed on the property last week! He has immediate equity in the home as the comparables are selling at no less than $200,000 and the appraisal came in at $210,000!!
The seller was happy as he avoided a foreclosure on his credit record!
U.S. House panel OKs debt forgiveness in foreclosures
An interesting story applies to sellers that "short-sale" their home - that may relieve them of tax penalties...
U.S. House panel OKs debt forgiveness in foreclosures
Foreclosed homeowners won’t have to pay income tax on debt forgiven by a lender under a bill that passed a U.S. House panel yesterday. Should the bill become law, the bill would also extend the tax deduction for PMI and change slightly the rules for shielding $250,000 in capital gains from the sale of a second home.
H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, now goes to the full House for a vote.
Debt forgiveness in foreclosures
Currently, homeowners who lose their homes to foreclosure generally have some mortgage debt forgiven by the lender, but the IRS considers that forgiven debt taxable income, charging extra tax to people who just lost their home. H.R. 3648 would provide a permanent exclusion for any discharge of indebtedness (on or after Jan. 1, 2007) that is secured by a principal residence and incurred in the “acquisition, construction or substantial improvement of the principal residence.”
Long-term extension of the deduction for private mortgage insurance
The bill extends the tax deduction for private mortgage insurance for seven years – through 2014.
Gain on the sale of a principal residence
Taxpayers may exclude up to $250,000 ($500,000 if married filing a joint return) of the gain realized on the sale or exchange of a principal residence. H.R. 3648, however, changes slightly the definition of principle residence when it’s applied to second homes. Under current law, a home qualifies for the exclusion if it’s a taxpayer’s principal residence for at least two of the five years preceding a sale ending on the sale, even if the home was initially purchased as a second home.
Under the bill, the timeline changes. A taxpayer may only use the deduction on a home sale after a home becomes his principal residence. Time spent living in the home does not count toward the two-year minimum until the owner officially declares it his primary place of residence.
Qualification changes for cooperative housing corporations
Under current law, a cooperative housing corporation must follow some specific rules, including a requirement that 80 percent or more of the cooperative housing corporation is earned from the corporation’s tenant-stockholders. H.R. 3648 expands that requirement by providing two alternatives to this rule – one based on square footage and another based on cooperative expenditures.
U.S. House panel OKs debt forgiveness in foreclosures
Foreclosed homeowners won’t have to pay income tax on debt forgiven by a lender under a bill that passed a U.S. House panel yesterday. Should the bill become law, the bill would also extend the tax deduction for PMI and change slightly the rules for shielding $250,000 in capital gains from the sale of a second home.
H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, now goes to the full House for a vote.
Debt forgiveness in foreclosures
Currently, homeowners who lose their homes to foreclosure generally have some mortgage debt forgiven by the lender, but the IRS considers that forgiven debt taxable income, charging extra tax to people who just lost their home. H.R. 3648 would provide a permanent exclusion for any discharge of indebtedness (on or after Jan. 1, 2007) that is secured by a principal residence and incurred in the “acquisition, construction or substantial improvement of the principal residence.”
Long-term extension of the deduction for private mortgage insurance
The bill extends the tax deduction for private mortgage insurance for seven years – through 2014.
Gain on the sale of a principal residence
Taxpayers may exclude up to $250,000 ($500,000 if married filing a joint return) of the gain realized on the sale or exchange of a principal residence. H.R. 3648, however, changes slightly the definition of principle residence when it’s applied to second homes. Under current law, a home qualifies for the exclusion if it’s a taxpayer’s principal residence for at least two of the five years preceding a sale ending on the sale, even if the home was initially purchased as a second home.
Under the bill, the timeline changes. A taxpayer may only use the deduction on a home sale after a home becomes his principal residence. Time spent living in the home does not count toward the two-year minimum until the owner officially declares it his primary place of residence.
Qualification changes for cooperative housing corporations
Under current law, a cooperative housing corporation must follow some specific rules, including a requirement that 80 percent or more of the cooperative housing corporation is earned from the corporation’s tenant-stockholders. H.R. 3648 expands that requirement by providing two alternatives to this rule – one based on square footage and another based on cooperative expenditures.
Monday, October 1, 2007
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