by Jim the Realtor | Dec 5, 2013 | Short Sales, Short Selling |
Dec. 4 – The CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) announced today it received a letter from the California Franchise Tax Board (FTB), obtained by Board of Equalization (BOE) member George Runner, clarifying that California families who have lost their home in a short sale are not subject to state income tax liability on debt forgiveness “phantom income” they never received in a short sale.
Last month, in a letter to California Sen. Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called “cancellation of debt” income to the underwater home seller for federal income tax purposes.
Following the IRS’s clarification, C.A.R. sought a similar ruling by the California FTB. Now with the FTB’s clarification, underwater home sellers also are assured that they are not subject to state income tax liability, rescuing tens of thousands of distressed home sellers from California tax liability for debt written off by lenders in short sales.
“We are pleased with the recent clarifications issued by the IRS and the California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California,” said C.A.R. President Kevin Brown. “We would like to thank Sen. Boxer and BOE member Runner for their leadership in obtaining this guidance from the IRS and FTB.”
“Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability, even after the Mortgage Forgiveness Debt Relief Act of 2007 expires at the end of this year.”
by Jim the Realtor | Nov 29, 2013 | Shadow Inventory, Short Sales, Short Selling |
From NMD:
RealtyTrac reports that the nature of distressed property sales is evolving. In its most recent report on market and distressed sales, the company noted that changing economics are increasing the reliance on more traditional third party purchases at foreclosure auctions rather than the lender/borrower negotiated sale at less than the outstanding loan balance.
“After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction sales and bank-owned sales,” said Daren Blomquist, vice president at RealtyTrac.
“The combination of rapidly rising home prices – along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home – means short sales are becoming less favorable for lenders.”
Read entire article here:
http://www.mortgagenewsdaily.com/11252013_realtytrac_home_sales.asp
by Jim the Realtor | Nov 15, 2013 | Foreclosures/REOs, Short Sales, Short Selling |
From the wsj.com:
Troubled homeowners who get a break from their mortgage lenders could face a hefty tax bill next year if a key provision expires at the end of the year, though state laws could determine which borrowers will have to write a check to Uncle Sam.
Homeowners who live in states where mortgages are non-recourse—that is, where they aren’t personally liable for the unpaid balance—may avoid the potential tax hit even if Congress doesn’t act, according to a letter sent by the Internal Revenue Service released by Sen. Barbara Boxer (D., Calif.) on Friday.
In the letter to Sen. Boxer, the IRS clarified that certain non-recourse debt forgiven by lenders wouldn’t typically be considered taxable income by the IRS. This means that for most California borrowers, the expiration of the tax provision may not have a meaningful effect.
“California homeowners have struggled through years of economic hardships during the Great Recession,” said Ms. Boxer in a statement Friday. “I am relieved that these families will not face a burdensome tax penalty just as they are trying to rebuild their lives with a short sale.”
In the letter, the IRS wrote that “if a property owner cannot be held personally liable for the difference between the loan balance and the sales price, we would consider the obligation a non-recourse obligation.” As a result, the owner would not have to count that forgiven debt as income.
Other states with laws that prevent lenders from seeking so-called “deficiency judgments” to recoup defaulted debts from borrowers would likely be in the same camp as California, the letter said.
Short sales have fallen sharply as a share of overall sales over the past year as the housing market has rebounded and fewer homeowners have found themselves underwater. In California, short sales accounted for around 12.6% of homes that were resold last month, down from 26.7% one year earlier, according to research firm DataQuick.
Read full article here:
http://blogs.wsj.com/developments/2013/11/15/why-california-homeowners-could-avoid-tax-forgiveness-hit/
by Jim the Realtor | Oct 30, 2013 | Foreclosures/REOs, Loan Mods, Mortgage News, Principal Reductions, Short Selling |
Hat tip to daytrip for sending in this article from the latimes.com alerting us to the expiring The Mortgage Debt Relief Act of 2007, wrapped around the free cheese in the recent JP Morgan settlement:
http://www.latimes.com/business/hiltzik/la-fi-mh-homeowners-20131029,0,6953798.story#axzz2jD09ygWq
David Dayen spots a new blow for underwater homeowners that thus far has flown under the radar: the coming expiration of the Mortgage Forgiveness Debt Relief Act of 2007, scheduled for Dec. 31.
The act is a mouthful, but it’s been a crucial factor in helping countless families get out from under bad mortgages. Simply put, the act relieves homeowners from having to pay taxes on any loan forgiveness they receive in a mortgage restructuring. (The maximum exemption is $2 million for a couple.) The measure was originally set to expire last Dec. 31, but it was extended another year by the fiscal cliff deal.
The foreclosure crisis is ebbing, but the relief is still needed. Millions of families are still underwater and facing delinquency, default, and foreclosure. As Dayan notes, those who succeed in obtaining principal reductions will be getting a bill that’s almost certain to be unaffordable.
As an additional irony, the act’s expiration comes just as JPMorgan, one of the banks that contributed massively to the housing crisis, reaches a deal that gives it a tax break on its multibillion-dollar settlement of federal charges related to the disaster.
He suggests folding an extension of the homeowner relief act into the JPMorgan settlement, but the extension looks like something that would have to clear Congress all by its lonesome. What are the chances of that? Congress has a lot to do as the end of the year looms. Somehow the things that aren’t on its agenda are all needed to help the less advantaged of society — food stamp extensions and now mortgage relief. Come New Year’s Day, we’ll be asking once again: Who do the people on Capitol Hill work for?
by Jim the Realtor | Oct 16, 2013 | Fraud, Short Sales, Short Selling |
Hat tip to bode for sending this in from the latimes.com:
A Bank of America Corp. employee assigned to deal with delinquent mortgages has been arrested on federal charges of accepting more than $1 million in bribes to allow homes to be sold far below their market value.
Kevin Lauricella worked at a BofA facility in Simi Valley where he focused on short sales, said Ariel Neuman, an assistant U.S. attorney in Los Angeles. Short sales are transactions that allow borrowers in default to satisfy their mortgage debts by selling the property for less than they owe.
A 28-count grand jury indictment, unsealed Tuesday, listed 18 properties allegedly sold in late 2010 and early 2011 at prices below those the bank would have approved. Lauricella is accused of enabling the sales by improperly approving short sales and falsifying bank records.
Most of the homes were in the San Fernando Valley, but others were in Corona, Coto de Caza, Beverly Hills and Bel Air.
“The buyers would either resell the homes at the actual property values or in some cases would refinance the property at the actual value, thereby extracting profits on the deals,” Newman said.
Lauricella, 28, of Thousand Oaks, entered a not guilty plea Tuesday before a federal magistrate and was released on a $100,000 property bond, said his attorney, Ronald D. Hedding. Hedding said he had not yet had time to study the evidence against Lauricella and could not comment.
Documents filed with the indictment indicated the government seized Lauricella’s Chevrolet Suburban on grounds it had been purchased with criminal proceeds and intended to try to take away his home.
http://www.latimes.com/business/money/la-fi-mo-bofa-short-sales-bribes-20131016,0,2008694.story
by Jim the Realtor | Sep 26, 2013 | Ethics, Short Sales, Short Selling
Received today from the National Association of Realtors:
NAR members recently received word that the U.S. Department of Housing & Urban Development would be implementing a new policy on Oct. 1, 2013, that would prevent dual agency agreements in FHA pre-foreclosure transactions.
The National Association of REALTORS® immediately began talks with HUD officials on the proposed change. On Wednesday afternoon HUD officials reported to NAR that they would reissue the July Mortgagee Letter (#2013-23) and remove all dual agency language (Part Three of the PFS Participation Requirements).
The result is that the dual agency policy will not be implemented on Oct. 1, allowing NAR to continue the dialogue with agency officials on a formal solution to the dual agency issue.
HUD had proposed the policy change in response to fraud and abuse detected by the HUD Inspector General in the pre-foreclosure sales process.
NAR, working with state and local association presidents, sent a letter to HUD highlighting the concerns about the policy and the disruptive effect its implementation would have on communities across the nation.
The NAR has applied their considerable political weight to stall the implementation, summarized in the linked letter. It’s a real hoot, scoring high on the David Lereah Comedy Scale:
1. It quickly dives into the standard NAR blast: “NAR takes fraud very seriously. Our members adhere to a strict code of ethics.”
2. He then plays the naive’ card: “One-hundred years after its adoption, the Code of Ethics continues to be what sets us apart as REALTORS. If there is evidence of fraud by our membership, we would like to be a part of an effort to develop policies that effectively address these issues.”
Come on, Gary – everyone has known about the rampant short-sale fraud for years, and N.A.R. has done NOTHING to stop it. Now you are going to play stupid, and forge some phony-baloney compromise with HUD?
All national, state, and local associations, as well as every broker charged with supervising realtors, should take immediate action to stop short-sale fraud. If we don’t, somebody else will.
by Jim the Realtor | Sep 14, 2013 | Fraud, Listing Agent Practices, Short Sales, Short Selling
The impact of the short-sale fraud is becoming more obvious. It was at its worst in 2012, and though there has been some rebound this year, the short-sale average pricing is still well below the rest:
NSDCC detached homes sold between June 1-to-August 31:
| Year |
REOs |
SS |
Non-Dist |
All Avg $/sf |
All % chg YOY |
| 2009 |
$272 |
$310 |
$393 |
$380 |
-13% |
| 2010 |
$311 |
$296 |
$385 |
$371 |
-2% |
| 2011 |
$296 |
$296 |
$393 |
$378 |
+2% |
| 2012 |
$299 |
$269 |
$390 |
$371 |
-2% |
| 2013 |
$347 |
$287 |
$445 |
$437 |
+18% |
Fewer distressed properties selling for below-market prices this year has contributed to the spectacular rise in the cost-per-sf statistics – without them the year-over-year comparisions are going to flatten out.
by Jim the Realtor | Sep 14, 2013 | Foreclosure Count, Jim's Take on the Market, North County Coastal, Shadow Inventory, Short Sales, Short Selling |
Distressed sales have dwindled down to a fraction of the NSDCC market, though they were never a large contributor.
Here are the detached-home sales from the June 1-to-August 31 period:
| Year |
REOs |
SS |
Non-Distressed |
% Distressed |
| 2009 |
48 |
35 |
572 |
13% |
| 2010 |
46 |
69 |
575 |
17% |
| 2011 |
41 |
71 |
610 |
16% |
| 2012 |
45 |
102 |
748 |
16% |
| 2013 |
14 |
42 |
890 |
6% |
There are only 9 active listings of short sales (out of 1,030 total active listings), 29 are marked as contingent currently, plus 4 active listings of REOs.
Should the feds decide to not extend the relief from debt tax past 12/31/13, it should be the final straw and end short sales altogether around here.
For buyers, the hope of getting a deal should be fully extinguished, and just trying to find something suitable for a decent price is a major challenge.
by Jim the Realtor | Sep 7, 2013 | Bubbleinfo TV, Rancho Santa Fe, Short Sales, Short Selling, Why You Should List With Jim |
Short sales should be sold just like the rest.
Put an attractive price on it, conduct open-house so every buyer has a chance to not only see the property but the other potential bidders too, and then take all offers:
by Jim the Realtor | Sep 4, 2013 | Bubbleinfo TV, Rancho Santa Fe, Short Sales, Short Selling |
We tried everything possible to sell this for enough to cover the notes, but other agents giving away properties around us prevented us from doing any better. There have been two BPOs completed that were in this range, and the bank couldn’t wait any longer – so this is being offered as a short sale:
Last month, in a letter to California Sen. Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called “cancellation of debt” income to the underwater home seller for federal income tax purposes.
