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Archive for December, 2009

What is a Short Sale?

  • A Short Sale is when the home sold for less than the debt against the property and the lender(s) agree to accept a discounted payoff.  The lender agrees to accept less than what is actually owed on the mortgage.
  • A Foreclosure is when the lender seizes the home that the loan is secured by through the foreclosure process, which is notice of acceleration of note, notice of default, notice of sale, and then actual forced sale of the home known as a ‘trustee sale.’

What are the tax consequences?

  • Short Sale & Foreclosure….all debt forgiven results in 1099C debt.  Whether it is a primary or rental property makes a difference as to how much tax you may pay.  Simply stated, if you get released from debt the IRS sees that as income to you, just like you got a pay check.  See this publication from the IRS http://www.irs.gov/pub/irs-pdf/p4681.pdf on “Canceled Debts Foreclosures Repossessions and Abandonments.”
  • You may qualify for an exemption under the Mortgage Forgiveness Debt Relief Act – visit this IRS article for more information: http://www.irs.gov/individuals/article/0,,id=179414,00.html

What are the Credit Issues?

  • Foreclosures and Short Sales will appear on your credit history and affect you for up to 10 years.  This may affect a.) employment or b.) security clearance, etc.  Rumor is that a short sale is better than foreclosure for these items?  There is no evidence to back this up.  Arguments on both sides are out there.  We do know that there is a specific spot on the credit reports for foreclosure, whereas short sales are reported differently.  We have also seen examples of the credit score being impacted based on the total number of missed payments.

What is the liability for the Debt AFTER the foreclosure or short sale?

6 Months

  • Foreclosure – The foreclosing lender has the right to sue the home owner after the foreclosure for the difference between the amount gained at the ‘trustee sale’ discussed above and the balance of debt owed.  The lender has only 180 days (six months) from trustee sale to file, after that the owner is no longer liable.

6 Years

  • Foreclosure 2nd Deeds – All deeds that are junior to the foreclosing lender have different rights than the foreclosing bank.  These lenders are called ‘sold off junior lien holders’ and they have six (6) years to recoup their debt.  That means you get foreclosed on November 12, 2009, these junior lien holders have until November 12, 2015 to sue you.
  • Short Sale – All lenders that agree to a discounted payoff and ‘release the lien’ from the property to allow the short sale are no longer ‘secured lenders’ and are now ‘sold off junior lien holders’ as described above and have six (6) years to sue you.  UNLESS, the short sale is negotiated so the lender releases the homeowner from any future liability as to the forgiven debt.  Many lenders are taking a hard stance on this issue and NOT fully releasing and satisfying the forgiven debt.

Each short sale has it’s unique considerations and situation.  That is why it is so critical for homeowners to work with an experienced and knowledgeable short sale real estate professional.

Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale?

Contact us for a free consultation regarding your options – there are solutions!
Call  Stephanie at 702 – 497-7705
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Darren Welsh, corporate attorney for Prudential Americana Group Realtors, recently posted on his Nevada Residential Real Property Law blog advice on the specific language regarding release and full satisfaction of the forgiven debt in a short sale.  The Serra Group is experienced in the listing and successful closing of short sales.   We strive to negotiate a full release and forgiveness of debt on your behalf and advise consulting with a qualified  attorney if necessary.  We also structure the purchase agreement in such away that you will have the opportunity to weigh your options and should a full release and satisfaction not be possible, to allow you to cancel the sale without further recourse from the buyer.

Here is a re-posting of Attorney Welsh’s blog regarding release language in a short sale:

Advise the seller to seek legal counsel.  Nevada is a deficiency judgment state, which means a seller can be sued after they have been foreclosed upon.  A second can pursue a foreclosed owner for six years.  By performing a short sale, instead of foreclosure, the one-action rule and the deficiency protections are no longer applicable.  The Seller in a short sale will have a tax consequence.  Sellers in a short sale may also be sued by the lender for breach of non payment of a contractual obligation.  The statute of limitations in Nevada for breach of contract is six (6) years.

The following are some examples of language used by the lenders to deal with debt.  Some are good, some not so good, some BAD.  

Example 1 – Not GOOD

In this one, the lender states, “may pursue a deficiency…”  The seller may be sued for up to six (6) years.

BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above.  In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deiciency based on the terms of the mortgage insurance policy.

Example 2 – GOOD

In this one, the lender states, “settle your account…”

This letter is to inform you that Chase Home Finance LLC has agreed to your request for a Short Sale, and will accept a minimum of $$$$$ to settle your account and release the lien(s) on the above-referenced Property.

Example 3 – GOOD

In this one, the lender states, “will be charged off and no additional payment will be required…”

Our Customer(s) agrees that upon the posting of the agreed upon Short Sale amount, the remaining loan balance, if any, will be charged off and no additional payment will be required.  Please note a $0.00 balance will appear on the Customer’s file with the credit bureau as “Account legally paid in full for less than the full balance.”

Example 4 – GOOD

In this one, the lender states, “full and final satisfaction on the first mortgage …”

This letter will confirm our acceptance of the short payoff on the above referenced property.  We agree to accept the proceeds generated by the $$$$ “as is condition” purchase as full and final satisfaction on the first mortgage indebtedness on the above referenced property.

Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale?

Contact us for a free consultation regarding your options – there are solutions!
Call  Stephanie at 702 – 497-7705
Categories : Short Sale Tips
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This is the latest Las Vegas Real Estate Market Report from www.NARREIA.com (National Association of Residential Real Estate Investment Advisors). For the week of December 2, 2009, data is obtained from the Greater Las Vegas Association of Realtors MLS.

Single Family Residence (SFR)

  • Available – 8,478 (-110 , Last Week 8,588)
  • Under Contract – 11,436 (-223 , Last Week 11,659)
  • Days of Supply – 22 (+0 , Last Week 22)
  • Short Sales – 10,704 (+8 , Last Week 10,696)

Condominiums and Town Homes (CONDO/TH)

  • Available – 1,943 (-19 , Last Week 1,962)
  • Under Contract – 2,702 (-89 , Last Week 2,791)
  • Days of Supply – 22 (+1 , Last Week 21)
  • Short Sales – 2,645 (-19 , Last Week 2,664)

Combined SFR + CONDO/TH

  • Available – 10,421 (-129 , Last Week 10,550)
  • Under Contract – 14,138 (-312 , Last Week 14,450)
  • Days of Supply – 22 (+0 , Last Week 22)
  • Short Sales – 13,349 (-11 , Last Week 13,360)
Categories : Las Vegas Market
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