Act Now to Protect Underwater Homeowners in California – SB 30

State of CA flagThe State of California Appropriations Committee is meeting this Friday.  On the agenda a SB 30 which was originally introduced in December 2012 and finally received its first hearing last week.  If not approved this Friday, the bill would stall up until January 2014.

Why is SB 30 important?  Under the current state law, when a lender forgives mortgage debt in a short sale, the seller must pay state income tax on the amount of forgiven debit (there is currently no federal income tax).  If passed, this bill will assist to eliminate the state income tax on short sale transactions.   According to the California Association of Realtors (CAR) and many others, passing this bill is the right thing to do.  Distressed homeowners are faced with a no-win situation — either pay taxes on money they don’t get or let the home go into foreclosure.  They generally have two choices — foreclosure or short sale.  If they fear state income tax liability on a short sale, they are likely to choose foreclosure.  Foreclosures are bad for everyone….the community, the homeowner and damage property values more than short sales.

Not all delinquent homeowners face foreclosure because they purchased above their means.  Many homeowners have financial hardships that have placed them in a difficult situation.  If this bill is not passed, these borrowers will face credit challenges and additional financial challenges as a result of having to pay taxes on money they will never see again.

What can you do to help?

Encourage State Assembly member Mike Gatto (Chair of the Appropriations Committee) to pass this bill by visiting his Facebook page: www.facebook.com/mikegatto and sending him a message asking him to support SB 30 and distressed homeowners

OR

Call Assembly Member Mike Gatto at: 1-800-969-3420  — enter PIN number 3043 (call Monday – Friday 9 AM – 5 PM)
If you wish, you can bypass the first part of the message by entering the PIN, followed by the # sign, at any time. You may also bypass the 2nd part of the message by hitting the “1” key to be directly connected to the legislator’s office. Ask him to support distressed homeowners and support SB 30. As the Chair of the Appropriations Committee, he is responsible for the committee’s failure to act on behalf of distressed homeowners.

To read the full bill click here

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Distressed Sales in Mammoth Lakes

There are distressed sales in almost every market.   Before we look at Mammoth Lakes specifically, bank ownedit is important to understand the definition of distressed sale.

A distressed sale in real estate is defined as the urgent need to sell property when the owner can no longer make the mortgage payments.  He/she must sell the property immediately to pay off the mortgage, even if it involves losing money on the property.  There are two primary types of distressed sales:

Foreclosure:  A situation in which a mortgage lender takes possession of the property because the borrower  has not made payments on interest or principal for a certain period of time.

Short Sale:  An agreement between a mortgage borrower in distress and the lender that allows the borrower to sell the house and remit the proceeds to the lender.  A short sale is an alternative to foreclosure or a deed in lieu of foreclosure.

Foreclosure-related sales are on the decline but distressed sales continue to claim a “disproportionately high portion” of total home sales across the country, according to RealtyTrac’s most recent foreclosure and short sales report. The firm also found increases in prices for distressed properties in 2012.

Distressed property sales made up 43 percent of all home sales nationwide in 2012, according to RealtyTrac. Foreclosure-related sales made up 21 percent of all sales, while non-foreclosure short sales made up 22 percent of sales. Together, foreclosure and REO sales decreased 6 percent from 2011 with a total of 947,995 sales over the year in 2012.

Here in Mammoth Lakes, in 2012 distressed property sales made up 41 percent of all home sales.  Foreclosure sales made up 15 percent of all sales and short sales were 26 percent.

A qualified licensed real estate agent can provide information on available distressed sales.  Often the lender has special requirements for buyers and although there are some “good deals,” patience is a virtue when dealing with distressed sales.

For previous articles, visit www.SonjaBush.com

Short Sale Myths

Myth #1: The homeowner must hShort Sales Mythsave missed mortgage payments in order to qualify for a short sale. 


FACT: Years ago this may have been true, but not in 2012.

A financial hardship should exist or be imminent. But, not all people with financial hardships have missed a mortgage payment. Common hardships include mortgage rate adjustments, loss of job or income, health or medical issues, and divorce among others.

Myth #2: Banks prefer foreclosure to processing a short sale. 


FACT: The truth is that banks would prefer NOT to foreclose on a property because it costs them big bucks. The bank will lose a lot less on a short sale than on a foreclosure.

In fact, many banks are so interested in short sales that they are paying sellers to participate in a short sale versus letting the home go to foreclosure.

Myth #3: In order to the seller to qualify for a short sale, he or she must speak with the lender first and get pre-approved.

FACT: While each lender has a different way in which they process the short sale, overall the best way to get in front of a tough situation is to speak with a knowledgeable agent that knows how each short sale lender operates. Often, when calling the lender, short sale sellers find that they do not get the answers that they want and need from the first line of short sale support.

Myth #4: Short sales don’t close.

FACT: The truth is that about 50% of all nationwide real estate transactions right now involve distressed properties.

Myth #5: Short sales take months (and months) to close.

FACT:  It can take months to close if you don’t know “rules of the road.”  The short sale process must be mastered and it helps quite a bit to know the ins and outs at each of the major lending institutions. There are many short sales that can be approved in a much quicker time frame. The more liens on title, then the more lengthy the short sale process.  A qualified real estate professional can help navigate the process.

Source:  Short Sale Expeditor

Is it true that I can short sale my house and purchase again with no waiting period?

The answer is “yes” and “no” and “maybe.” According to an excellent chart that is available for download (http://www.scribd.com/doc/85625440/Loan-Waiting-Periods), if you are obtaining an FHA loan for your next purchase, there may be no waiting period for a borrower who participated in a short sale to buy again. However, that borrower would have to have completed the short sale with no late payments on any mortgages and no consumer debt within the 12-month period prior to the short sale. Also, the borrower must be able to prove that s/he was not taking advantage of the declining market conditions.

Short sale sellers are often curious about the waiting periods required to purchase again after significant derogatory credit events (such as short sale, foreclosure, and bankruptcy). Use the handy chart in order to familiarize yourself with the latest and greatest information about all of the different loans and their waiting periods. That way, when you take your next short sale listing, you will have another tool at your disposal.

Source: ShortSaleExpediter.com

What is the difference between a short sale and foreclosure?

Whether you’re a seller in the middle of a real estate problem or you’re searching real estate listings as a potential buyer, it’s important to know the difference between a foreclosure and a short sale. Foreclosure is a far worse fate than a short sale if you are the seller, but as a buyer of a distressed property, a short sale is often the more difficult process to wade through.

A property that has been foreclosed on means the owner was not able to make the monthly payments for a certain amount of time and the lender has taken control of the property. If not sold at auction, foreclosure property is simply owned by the lender, often called REOs or real estate-owned properties. In either case, the seller is taken out of the equation and the buyer only negotiates with the bank /lender.

You can stop a foreclosure by considering a short sale. Don’t be fooled by the name, the process of a buying a short sale property can be a long one. Once the seller accepts an offer, he sends it to the lender for approval. Even if a seller accepts the offer, the lender’s approval is the one that matters and that can take time. More paperwork is involved in a short sale than a regular sale, or even a foreclosure.  Use a realtor who is knowledgeable in short sales, as there are many nuances to completing a short sale successfully.

With both foreclosure and short sales, the sellers credit is affected negatively. According to MyFico.com for a foreclosure, you can expect your FICO score to drop by as such as 200 and for a short sale at least 75 points.  Both types of default are considered as “not paid as agreed.”  There are also tax consequences to consider with both options – check with your accountant.

Sonja Bush

Broker Associate – DRE #01904399

                       

The Village at Mammoth

661.979.9000 cell

sonja@sonjabush.com

www.mammothvillageproperties.com