Real Estate Purchase Contract

What is a real estate purchase contract?

A real estate purchase contract is an agreement between two or more parties to purchase a specified property.  These contracts are very common in every real estate transaction, and are the legalities that bind both parties to the exchange.  All parties involved must be in agreement to the purchase contract.

Bank of America Short Sale Process

Once all parties involved have agreed to the terms of the short sale, Bank of America will take another 5 days to get a decision back.

Tax Ramifications of a Short Sale

What are the tax ramifications of a short sale?

Unfortunately, homeowners who short sale their property do not always get off the hook completely. Homeowners may not realize that they owe taxes from the short sale until they recieve a 1099.   This may turn certain homeowners away from a short sale, but the truth is if you are facing foreclosure it is still your best option.

Different people will give different information regarding the tax ramifications of a short sale.  From all the information I have gathered it is still a better move to short sale as oppose to get foreclosed on.  There can be major tax consequences to a person who walks away form their proeprty because they have no equity left.

Example:

Mr. Wallace buys a property as his personal residence for $500,000.  He puts $100,000 down and gets a loan of $400,000.  The property has declined drastically due to the economy and the property that he bought for $500,000 is now worth $300,000.  He still owes $380,000 for the mortgage.  Mr. Wallace will not be able to make his payments moving forward due to a hardship.  So he sells the property for $300,000 and the bank forgives him for the remaining $80,000.

According to the tax code, the transaction is considered a sale.  There is no deduction for the loss because the property was used as a personal residence.  Although if the property was foreclosed on the IRS treats  treats it as taxable income, and can tax you on the deficiency balance.

For all homeowners who are facing foreclosure, be sure to plan ahead.

Credit Effects of a Short Sale

Your credit will not be affected as poorly as a foreclosure on your credit report.  There is generally a 50-80 point hit on your credit score, which appears as “debt settled”.   On the opposite end, a foreclosure will take 5-7 years to restore your credit to what it once was before the foreclosure.

The affects of a Foreclosure or Deed-In-Lieu of Foreclosure

We are seeing an average hit of about 200-280 points on your credit score.  According to debtkid.com “A pre-foreclosure FICO fo 675 could drop to as low as 395, essentially eliminating you from future credit approvals. ” We are seeing that it is taking about 5 years to apply for a new loan.

Consulting with a CPA

It is always a great idea to consult with a tax accountant regarding the tax ramifications of a short sale.  One may be charged for a consultation, but it is worth the knowledge of knowing where your credit will stand after a short sale.  It is important for homeowners to get the proper help that they need.  Make sure to work with people who have a strong understanding of short sales.

Short Sale Negotiating Service

Short Sale Negotiating Service

A short sale negotiating service will be able to get your lender or mortgage service to approve a short sale. This would work best for homeowners who are facing foreclosure, or will be facing foreclosure in the near future.  We are currently facing a very tough economy, and it is proven that the right short sale negotiating can put you in a better position.  There are certain companies that will handle all of the grunt work for the homeowners, lifting a load off of their shoulders.

There are certain pre-requisites to consider when hiring a short sale company:

• Make sure this negotiating company does not charge you, they are getting paid a commission from your lender
• Make sure they have successfully negotiated hundreds of short sales prior to working on your file
• Don’t hire a real estate agent, who is unfamiliar with short sales.  They are probably just taking it on to make any money possible.
• Don’t hire a one man “loss mitigation specialist”, try to a hire a larger company with a lot of experience like Housing Assist.

There is no need to panic, everything will be alright!! Just make sure to pick a company who understand short sales and knows how to execute them successfully.

It’s going to be OK

No matter what happens, it’s going to be OK. You’re taking action, and the sooner you get someone on your side, the better you will feel!

Loan Definition

What is a loan?

A loan is when the lender gives money to a borrower, and the borrower agrees to certain terms in repaying the money.  Many times this is included with a fee of interest.  There is usually a time period to pay the loan off.  The lender faces the risk of not being paid back.

Short Sale Definition

What is a short sale?

A short sale is when a property owner sells their property for less than the amount owed on the loan.  The lender accepts a discounted payoff, and will release the loan that is secured to the property.

Foreclosure vs. Short Sale

Foreclosure vs. Short Sale

Foreclosure is a proceeding that allows the financer to regain the property because the borrower has defaulted on payment.  Foreclosure is a long legal procedure, time consuming and money consuming, to all parties involved.  Short sales put an end to these problems and stop the collection of calls.

Housing Assist researches and chalks out the best plan for the homeowners and gets qualified buyers for these properties.   They will also negotiate the entire short sale with the lender at NO COST.

If you are considering foreclosure as an option to avoid the severe trauma your critical financial status causes, one should really consider a short sale of their property.  The lender undertakes to condone a loan balance owed on a loan secured by the property.  In foreclosure your credit rating is disturbed for ten years as it appears on your credit report.  This will prevent you from obtaining a fresh loan for a period of 7 years.  In a short sale your credit is restored in just 2 years, preparing you to obtain another purchase loan.

Advance Fees For Loan Modifications

As of October 11, 2009, the governor has signed the Senate Bill 94,  legislation has taken effect immediately. California law has put a restriction on any person, from demanding or collecting an advance fee from a consumer for a loan modifiacation or mortgage loan forbearance.  Advance fees for loan modifications after october 11, 2009 will be fully refunded.

This is going to put a damper on a lot of loan modification companies. Now they won’t be able to charge people up front, which will put a hold on their business.  And if they do continue to do loan modifications, they will have to trust the homeowner to make that payment.  Advance fee agreements being out of the picture, help remove the unethical companies.

Short Sale & Buy Program

There are a large number of homeowners in Southern California who have no equity.  The major concern that these homeowners have is whether they can sell and move into a new home without a foreclosure.  The only options that homeowners have at this point are: Modify the loan, yet the negative equity will remain

• Modify the loan, yet the negative equity will remain
• Short Refinance; very few lenders participate with this
• Continue making payments and wait 10 years to break even on property
• Short sell, and if payments remain current they can purchase another home immediately
• Foreclosure

« Previous Page — Next Page »