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Jim Klinge
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Posted by on Mar 14, 2012 in Bailout, Short Sales | 6 comments | Print Print

Mortgage-Debt Forgiveness

I haven’t seen any official N.A.R. statement regarding an extension of the tax exemption of debt relief, but there was a mention here in the first paragraph from their tax counsel:

http://rismedia.com/2012-03-11/what-you-need-to-know-about-cancellation-of-mortgage-debt/

“NAR will be working to obtain an extension throughout the year”.

It sounds like they are getting ready to begin to think about starting their calls to Congress.  But this is an election year, and if they don’t already have this well in hand by now, how much luck will they have in the next nine months?

Could it be positioned as a vote-getter?

It’s about the only way to get the attention of a politician, and even then there will be plenty of disgust among the good-paying Americans.

I think it will be allowed to expire.

The closer we get, the more panic we’ll see on the streets.  The natural inclination will be to aggressively price a short sale, so it sells immediately.  But it will be smarter to price them at the comps, so there aren’t appraisal issues later.

Even though the servicers have done wonders lately to pare down the processing time to 2-3 months, if a surge of short sales rolls in, will they be able to handle them?

Probably not, and they shouldn’t have any liability to process them expediently. “Heck, we’re doing the best we can!”

For buyers and sellers alike, to have some assurance that your short-sale escrow will close in time, you should be in process by mid-summer at the latest.  Otherwise, the sellers will be hoping that the N.A.R. lobbyists can pull off a last-minute miracle, or get the new Congress to approve a new version, and back-date it.

Sellers will want to cancel sales that cause them to pay regular income tax on the debt relief – they’ve had it so good for so long that they’ll expect more favors.

Listing agents should write in their counter-offers that if the sale is not consummated by 12/31/12, then it automatically cancels if there is no new exemption in place.

How many buyers will go for that?

The exemption applies to those who get foreclosed too – will lenders do borrowers a favor and hurry up and foreclose on them by the end of 2012?  It should provide more thrills to our wild ride the rest of the year!

Straight from the IRS:

http://www.irs.gov/individuals/article/0,,id=179414,00.html

6 Comments

  1. This appears to have been a factor in a sweet short sale deal a friend of mine just got in La Mesa.

    The owner apparently realized it was now or never.




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  2. Where I live, near Sacramento, most new listings are shorts, or are $30-$50/sqft higher if listed as actives.

    What I’m curious about are short sales where the house hasn’t sold, and its price is continually reduced until sale. For example, a short I put an offer on:

    Listed at $560K 1/10
    Lowered to $530K 1/23
    Lowered to $510K 2/2
    Lowered to $485K 2/14

    The seller accepted offer at $475K, and the listing agent thinks the price would be approved because he can show that the house didn’t sell at higher prices. My realtor suggested that this could work, but if the BPO came in higher, the bank might refuse. In the meantime, it’s short-sale limbo.

    Has anyone run into this on a short sale before?




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  3. The listing agents get ignored, and banks put all their faith and trust into a $75 broker price opinion, because it’s supposed to be neutral.

    But a neutral knucklehead is all you get for $75.




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  4. From Mortgage News Daily:

    Mortgage rates moved higher today at their fastest pace in months. 3.875% Best-Execution is off the table today and even the more aggressively-priced group of lenders is most advantageously priced at 4.0%, some lenders at 4.125%. This was a very big, very fast move.




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  5. The 10 & 30 T’s have shot up 25bps in two days.




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  6. Lynn, yes. A coworker had a short sale listed at $585k, got an all cash offer at the listing price and wells fargo turned it down because they had a BPO at $775k. And BPO’s here bring $50, not $75. The listing agent offered to pay for a real appraisal out of her own pocket and wells turned her down. BPO’s by someone who knows the market are as accurate as a good appraisal, one knocked out by a newbie trying to raise gas $, not.




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