AZ Short Sales & Promissory Notes
COUNTRYWIDE AND PROM. NOTES
ARGH!! I just finished about a 2 week long battle with Countrywide. They wanted the Seller to sign a promissory note to approve the short sale. This is of course after 3 months of getting to this point. After going back and forth with them and begging and pleading my client’s case they absolutely refused to approve the sale w/out the promissory note. I argued w/the negotiator and asked to speak to her supervisor. I confronted her and asked if this was a Fannie Mae policy, a Countrywide policy or her personal policy. I asked to speak w/her supervisor. She did call me and confirmed the above. Keep in mind their loss on this was 52K which in our market is small comparatively speaking….Anyway my Seller did not want to sign a note. The note was not large and they said that they took everything into consideration with the amount as well as the term. The buyer really wanted the property and buyer’s agent asked me to propose to negotiator that the buyer come up w/the amount.
So guess what folks? Are you ready for this one?………..Negotiator says that if buyer wanted to pay another “X” amount that was fine but that they WOULD STILL NEED A PROM NOTE FROM THE SELLER!! This is obviously not about the money!!! So we don’t have a deal and it seems they are perfectly willing to foreclose on this house and you KNOW it will cost them more than the original loss! They want blood from the Seller!!!
Since the Supervisor tells me that this is indeed their policy and they take each case into consideration before assessing a prom note. Basically if you aren’t out of a job, or don’t have a medical hardship they are going to ask the Seller to sign a prom note.
So what now fellow Realtors? Do we advise all our Countrywide client Sellers to get prepared for the possibility of a prom note? If they are not willing be prepared to take the foreclosure instead? Or will it all change next week?…..
Comments please!
Sincerely,
Elise Fay & Deidre St. Romain
John Hall & Associates
Glendale AZ Short Sales
Short Sales and 1099s in Temecula
As short sale specialists we get many questions but the one that is most asked and seems to be the most convoluted in today’s market, is will I receive a 1099 for the difference of what is owed on the home vs what someone will purchase it for. In other words if you owe $400k on your loan but the house only sells for $250k will you receive a 1099 to be reported as income on your taxes for $150k.
The answer to this question is almost always Yes and NO. Based on the Debt Forgiveness Act of 2007, if the house you are selling is a primary residence than you will receive a 1099 for the difference but based on qualifying you will not be required to pay taxes on the difference.. If it is a rental, you may. However, if you are insolvent at the time of the sale, which means that your liabilities are higher than your assets, than this debt will be forgiven as well. Mostly all sellers will qualify under this law and will not have to report any income on their taxes.
In other words the receipt of the 1099 does not require you to pay the taxes on the money but a seller will actually recieve one. So if you had a short sale in 2008, you will be receiving a 1099 but don’t be alarmed, it will most likely just be another piece of paper you need to give to your tax preparer.
To learn more about this you can visit the IRS site regarding the Debt Forgiveness Act of 2007. You can also contact us if you are in the Southwest Riverside Countyarea or any other contributor to this blog. You shouold also check with your accountant to verify all information.
Temecula, CA
Orange County California Short Sales
Distressed property listings in Orange County, California comprise 66% of the market. This is divided between REO and short sale listings.REO listings for under the conforming loan limit of $417,000 are listed below market and are selling within a week with multiple offers. Short sales are taking longer to get listings because buyers and selling agents have had some reluctance to make offer on these listings because the lenders are typically taking from 45 to 90 days or more to approve them. That being said, I have recently been having very good experiences with the loss migitgation departments of lenders whereby we are getting approvals to short sales within 3~4 weeks of submission of a complete short sale package. This was unheard of as recently as 3~4 months ago. It would appear that lenders are implementing more streamline procedures so that short sales can be reviewed and approved in a more timely way. I believe they have learned that buyers lose patience and move on because the approval process was taking too long. When the buyer walks, it benefits no one; not the listing agent or homeowner, not the selling agent or buyer and certainly not the lender/investor holding the mortgage note that is not a performing asset. The time, effort and expense expended processing the short sale is lost without the buyer at the end of the process.
We have a lot of experience listing, packaging and negotiating short sales and are ready to assist you if you are a distressed homeowner or investor with property in Orange County, California.
Best regards,
Rick Stuart CRS, GRI, SRES, ASR, e-PRO Certified Internet Professional
Coldwell Banker Real Estate
949-702-4499 cell
Rick@RickStuart.com email
www.RickStuart.com website
(Part 3 of 3) Will my be able to be sold on a foreclosure short sale by an agent or expert successfully?
Short sale success factor # 7 – fraud – Did you commit fraud in any way previously? Did you lie and/or exaggerate in any way on your loan application in any way? Did you default on your loan in the first six months?
If you answered yes to any of these you either committed fraud or in the case of the early default you will be flagged in your lenders database for possible fraud. Fraud is a big deal and it effects your ability to do a short sale. If you as the seller committed fraud and you admit to it I will not be willing to work with you. I simply don’t want to be connected to a deal where my client has willfully committed fraud. I have had short sales denied by lenders in because they wanted to have all options open to pursuing the homeowner for fraud. In addition I don’t want to be part of the problem.
However if the seller was the victim of predatory lending and for mortgage fraud than that changes things. Instead of being a negative factor for short sale success it has the possibility of being a positive factor for successful short sale completion. This is especially true if you as a seller are willing to leverage this factor by suing your lender. Any law suit will actually increase your lender’s motivation to work with you to avoid an expense and bad publicity.
Short sale success factor # 8 – Market history - How long has your property been listed? How much was it listed for? Was the property listed with an agent at all before receiving an offer?
An important part of short sale success is fitting your lenders guidelines. Many lenders require a property to be marked for a certain amount of time before they will entertain a short sale. Most banks want to know that a property was at least listed with a realtor. HUD will not even allow a short sale unless a property has been listed with a realtor first. The fact that a property has been listed verifies with a lender that a professional has actually exposed your home to the widest part of the market and helps to ensure the lender that they are receiving a short sale fair offer.
Andy Morris is a Short Sale Specialist in North Eastern Ohio and Greater ClevelandPhone / fax: 440-427-0123 email: andy@iAndyMorris.com
iAndyMorris.com- My personal real estate practice.
eSTOPforeclosure.com- 7 free video lessons on your foreclosure options
Miami, Review Your Options When Facing Foreclosure, Part 2
What are the options available to a homeowner facing foreclosure?
Most homeowners have several options, but some options (including a short sale) are not offered by some lenders depending on the homeowner’s situation. Many options require the homeowner to have some cash available.
This article covers the options that typically do not require cash from the homeowner:
Deed in Lieu of Foreclosure – The lender offers to accept the deed to the property in exchange for dropping the foreclosure action.
Do Nothing: Foreclosure – The lender takes back the house, and the homeowner is required to vacate the home at the time of sale or eviction proceedings begin.
Short Sale – The lender(s) accepts less than what is owed on the loan.
Why would a lender accept a short sale?
A 2002 study by Craig Focardi of the Tower Group estimated that the entire cost of a foreclosure was $58,759 and took 18 months. Other factors that can influence a bank’s decision include 1) the liability risk it assumes by owning the property after foreclosure, 2) the money tied up during the holding period for a foreclosure and 3) Real Estate Owned (REO) resale, wherein the lender incurs additional costs such as attorney’s fees, and the additional reserves needed to offset the property value in the bank’s portfolio.
What are the potential negative aspects of a short sale?
When a lender accepts less that what is owed on the loan, this is called “Accepting a deficiency”. The lender may choose one of three options: 1) Do nothing - often lenders simply write off the losses they take by accepting a short sale; 2) Securing a deficiency judgment and placing the balance owed on the homeowner’s credit; OR 3) Report the loss to the IRS on a 1099c as earned income to the homeowner.
There are some exceptions; but, typically, a 1099c, unearned income, does not apply to a primary residence. Also, a 1099 may not be a factor if the homeowner is financially insolvent at the time of the filing. These are the primary reasons the homeowner should consult a tax advisor or accountant.
A deficiency judgment is possible even if the homeowner does not pursue a short sale. The lender may accept less that what is owed at auction, which could also result in a deficiency judgment.
These are the reasons you should consult an attorney and/or and accountant/CPA for advice. Do not ask or expect advice from your Realtor on these topics.
So, for those with little or no cash, the only option to avoid foreclosure is a short sale.
The next article will cover the basic options available to a homeowner who does have cash available. These options all involve the foreclosing lender. It is my recommendation that you DO NOT PAY ANYONE to help you with a short sale. There are many companies that charge homeonwers up front to negotiate with their lender. I have yet to speak with a homeowner who actually received any help. Without exception, every person I have talked with has felt taken advantage of by these companies.
