by Jim the Realtor | Sep 4, 2013 | Foreclosures, Local Government, Short Sales, Short Selling |
From the California Association of Realtors:
LOS ANGELES (Sept. 3) – Thanks to partisan political gamesmanship by the Assembly Appropriations Committee, struggling homeowners who sold their homes in a short sale in the past eight months will be further penalized by being forced to pay state income taxes on money they never received, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
Senate Bill 30 conforms California tax law to federal tax law, which already says sellers can’t be taxed on forgiven mortgage debt. SB 30 failed to pass out of the Assembly Appropriations committee last Friday. The vote on the bill was along party lines with Democrats voting “no” and Republicans voting “yes.”
“We are disappointed that California Assemblyman Mike Gatto (D-Pasadena) failed to show the leadership necessary to provide relief to distressed homeowners who are already in dire financial trouble,” said C.A.R. President Don Faught. “These are real families in real financial need who may well be forced into bankruptcy by an unresponsive legislature. To heap an unfair tax bill on top of the pain and emotional duress of losing a home is unconscionable.”
Under 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 debt. The previous California exemption lapsed at the end of 2012, so forgiven mortgage debt on short sales occurring in 2013 is considered taxable state income. The federal government does not charge federal income tax, and neither should the state.
Unfortunately, Senate leadership, in an act of political gamesmanship, linked the enactment of SB 30 to a new tax measure in an effort to extort C.A.R.’s support for that tax measure.
by Jim the Realtor | Aug 13, 2013 | Fraud, Scams, Short Sales, Short Selling |
This is a typical bank form that all parties are required to sign in order to close a short sale:
BofA short-sale addendum-broker cert
The form requires that the deal is an arm’s length transaction – and now we have some enforcement, at least in Nevada:
A Henderson couple could face up to 30 years in prison and a $1 million fine if convicted of bank fraud allegations in the short sale of their home.
Cynthia Hosbrook, 41, a licensed realtor, and her husband, Robert Hosbrook, 51, were indicted in U.S. District Court on Wednesday after authorities alleged they made false statements to Wells Fargo Bank to obtain approval of the short sale on their house.
They were charged with one count of conspiracy to commit bank fraud and one count of bank fraud.
According to the indictment, the couple asked a relative to act as a straw buyer for the purchase of their home in the 2700 block of Mallard Landing in Henderson in March 2010. The couple then submitted paperwork to Wells Fargo indicating that the sale would be between unrelated parties.
The Hosbrooks also allegedly asked the straw buyer to sign paperwork indicating that the buyer would be living in the property, which was untrue.
The form also tries to impose broker-agency (on page two) by having the agent agent certify that the property was:
‘….listed on the local Multiple Listing Service at fair market value to provide open market competitive bids to present to seller as per terms of the seller/agent listing agreement and that the marketing is in fact and “in spirit” seeking to maximize the selling price of the property.’
Hopefully there will be more convictions that draw attention to the crime – I’m not sure that all realtors recognize that they are committing felonies!
by Jim the Realtor | Aug 12, 2013 | Short Sales, Short Selling
It sounds like this erases the record altogether – from C.A.R.
Effective January 1, 2014, California’s anti-deficiency laws that generally prohibit a foreclosing lender from obtaining a deficiency against a borrower have been expanded to also prohibit the lender from claiming that a deficiency is owed or collecting on a deficiency.
Existing law already generally prohibits a short sale lender from claiming a deficiency is owed or from collecting a deficiency. Currently, certain lenders and debt collectors contact borrowers after foreclosure in an attempt to collect on deficiencies claimed to be due and owing.
The new law, Senate Bill 426, will generally prohibit a lender from claiming that a deficiency is owed, such as on a credit report, or from collecting a deficiency.
The new law applies to loans foreclosed upon by a trustee’s sale, as well as loans secured by purchase-money, owner-occupied, one-to-four residential unit properties (including refinances with no cash out). A lender, however, can pursue a deficiency against a guarantor or other surety (such as a mortgage insurer), or pursue other security for a cross-collateralized loan.
(more…)
by Jim the Realtor | Aug 8, 2013 | Foreclosure Count, Foreclosures, North County Coastal, Short Sales, Short Selling
The foreclosure era is winding down, and around the North San Diego County Coastal region, the overall impact has been less than imagined – let’s recap the counts of distressed-sales:
| Year |
Short-Sale |
REO |
Non-REO/SS |
Distressed-Sales % |
| 2008 |
5 |
30 |
2,002 |
2% |
| 2009 |
110 |
164 |
1,949 |
12% |
| 2010 |
216 |
199 |
2,045 |
17% |
| 2011 |
278 |
190 |
2,094 |
18% |
| 2012 |
356 |
162 |
2,634 |
16% |
| 2013 (YTD) |
103 |
30 |
1,866 |
7% |
| Totals |
1,068 |
775 |
12,590 |
13% |
Short sales have had more negative impact on average pricing than REOs lately, mostly due to realtor fraud:
| Year |
Short-Sale |
REO |
Non-REO/SS |
| 2008 |
$262/sf |
$284/sf |
$440/sf |
| 2009 |
$295/sf |
$284/sf |
$408/sf |
| 2010 |
$318/sf |
$292/sf |
$393/sf |
| 2011 |
$292/sf |
$293/sf |
$393/sf |
| 2012 |
$284/sf |
$289/sf |
$396/sf |
| 2013 (YTD) |
$277/sf |
$323/sf |
$427/sf |
| Totals |
$293/sf |
$297/sf |
$409/sf |
Hopefully this embarassing chapter in realtor history will be over soon.
by Jim the Realtor | Jul 31, 2013 | Actives/Pendings, Inventory, Sales and Price Check, Short Sales, Short Selling |
Fannie Mae’s new requirement that all HAFA short sales to be active on the MLS for at least five days amounts to shutting the barn door after the horses have escaped:
On or after August 1, 2013, all properties being considered for a standard short sale/HAFA II must be listed with an active status on a multiple listing service (MLS) for a minimum of five consecutive calendar days, including one weekend (i.e., Saturday and Sunday).
Insisting that the property be active on the MLS is easy to get around – agents who want to scam the system just won’t answer their phone for five days.
Lenders been requiring that short-sale participants sign an affidavit promising that the transaction is a legitimate arm’s-length deal, and has had open-market exposure. But shady realtors will sign those too – let’s face it, unless there is enforcement, rules and regs are meaningless.
But short sales appear to be winding down anyway. With lenders not threatening to foreclose, why short-sale? Defaulters will just live for free.
Currently short sales are 3.2% of the inventory county-wide:
| SD Co. Det & Att Listings |
ACT |
CONT |
PEND |
| REOs |
135 |
33 |
114 |
| Short-sales |
204 |
1,808 |
622 |
| Non-REO/SS |
5,966 |
54 |
4,300 |
| Totals |
6,305 |
1,895 |
5,036 |
With only 204 short-sales on the market, hopefully it means we are getting closer to the end – though they will likely stay around for years as a quiet alternative to the occasional foreclosure action.
On a side note, how about that active-to-pending ratio of 6,305:6,931? Any time that REOs and short-sales amount to less than 6% of the current inventory, and there are more pendings than actives you can say the market is in pretty good shape.
Contingents are similar to pendings; they probably have roughly the same chance of closing, because pendings are less of a sure bet at higher rates/prices.
by Jim the Realtor | Jul 9, 2013 | Short Sales, Short Selling |
The California Senate passed the California Association of Realtors-sponsored tax relief bill without a single “no” vote on June 20. SB 30 (Calderon, D-Montebello) protects homeowners from having to pay income tax on a short sale.
SB 30 will extend the sunset date in California law to Jan. 1, 2014. Upon its passage, the measure will be retroactive to Jan. 1, 2013. With its passage in the Senate, SB 30 is now headed to the Assembly. Realtors will be urging their Assembly members to pass the debt relief bill.
The road to passage is not all smooth, however. In late May, the Senate Appropriations Committee linked SB 30 to SB 391. The state group opposes this bill because it creates a $75 recording tax for all real estate transactions other than the sale of property. The link, in the form of an amendment, says SB 30 cannot take effect unless SB 391 does as well. The state Senate passed SB 391 on May 30 and, like SB 30, the bill will go to the Assembly.
“We will continue to work toward delinking the two bills–defeating the recording tax, and passing tax relief for those going through a short sale,” says Carolyn Miller, president of the Silicon Valley Association of Realtors.
While SB 391 does not apply to sale transactions, the measure applies any time a home/property owner records a document (e.g., refinancing, transferring into or out of a trust, liens, quit claim deeds, etc.).
“Realtors are advocates for affordable housing, but we believe it is bad policy to fund affordable housing at the expense of property owners who need to record real estate documents,” explains Miller.
http://www.mercurynews.com/saratoga/ci_23622676/california-passes-bill-forgive-debt
by Jim the Realtor | Jun 19, 2013 | Short Sales, Short Selling |
A tax provision that spares underwater borrowers from being penalized when they agree to a short sale is due to expire at the end of this year. But two senators want to extend the Mortgage Forgiveness Tax Relief Act through 2015.
Senators Debbie Stabenow, D-Mich., and Dean Heller, R-Nev., introduced the extension bill Wednesday.
“It is bad enough that so many families are faced with mortgages that now exceed the value of their home. But to add insult to injury, without this bipartisan bill, the IRS would once again require these families to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That’s just wrong,” Sen. Stabenow said.
Congress has provided this tax relief for underwater homeowners since 2008. If it isn’t extended, more distressed borrowers will choose do go through foreclosure as opposed to a short sale or deed-in-lieu transaction.
The Hope Now servicer alliance recently reported that 83,400 short sales were completed in the first quarter.
“If Congress does not act this year, then thousands of Nevadans who are underwater in their homes will be forced to pay a tax at a time when what they need is some relief,” Sen. Heller said. “This legislation is a common sense approach that will prevent Nevadans from being taxed on income they never received.”
http://www.nationalmortgagenews.com/dailybriefing/senators-seek-2-year-mortgage-debt-forgiveness-extension-1037051-1.html
by Jim the Realtor | Jun 17, 2013 | Short Sales, Short Selling |
I had this email conversation with a short-sale realtor who had listed a property for at least 10% under value last month, and marked it contingent immediately:
JtR: I’m curious about the price. With the reaction (she said she received a “bazillion” offers), it is obviously under value, and there are comps 10% higher. Why don’t you try to sell these for market value?
SSS: The short sale lender established the price – I am mandated by their program to advertise it, list it, amend my listing contract, etc at their approved list price, which is reflected as such. It is what it is – I am not doing anything I am not instructed to do by the powers that be….and who pays the agents’ commissions!
There is no reason to sell a property for more than a short sale lender requires unless the seller has tax implications – which they don’t. I am actually netting the lender $30,000 MORE than their required net proceeds believe it or not….So, the buyer gets a great deal – one of the few left out there…
JtR: No reasons? How about these:
1. The bank deserves full disclosure that their valuation is too low, and proper open bidding would attain a market-value sale. Don’t the investors deserve the truth?
2. The neighbors deserve a realistic comp.
3. Other buyers deserve a shot to compete.
I’m not blaming you personally, it is the system that is flawed. I’d love to see a short-sale agent address these reasons.
SSS: At the time the appraisal was completed, (months ago) – this was the fair market value of the property (maybe $20,000 low). There was no “full disclosure” needed – there was a full appraisal completed – not just a BPO. It’s not secret that the market has skyrocketed – but we had an open escrow and a legally binding contract when they issued their price.
The sellers chose the offer – not me.
I am not going to debate this with you to be honest; I don’t need to. I was instructed to do something by the two parties in charge – the short sale lender and the seller. And I did my job.
Have a good week…..
I dropped it after that, but the next question would have been – Did you disclose to the lender that you found a buyer, created a legally-binding contract, and opened escrow prior to putting the property on the MLS?
by Jim the Realtor | Jun 4, 2013 | Fraud, Short Sales, Short Selling
The number of completed short sales has dropped this year, and the agents who specialized in them are scrambling around trying to figure out how to be regular realtors.
Hopefully the short-sale business will conclude when the debt-tax exemption expires again on December 31st.
But in the meantime, the rampant fraud has continued in 2013. This year the REOs are selling for a higher average price-per-sf than short sales:
SD County Sales, All Props Jan 1 – June 3
| Year |
#REOs |
$$/sf |
#SS |
$/sf |
#Non |
$/sf |
| 2012 |
2,502 |
$178 |
3,401 |
$190 |
8,725 |
$253 |
| 2013 |
994 |
$200 |
2,335 |
$198 |
11,871 |
$285 |
Thankfully, the Non-distressed sales are dominating the landscape, and eventually we might forget about this seedy chapter in realtor history.
by Jim the Realtor | May 17, 2013 | Fraud, Scams, Short Sales, Short Selling |
These are the short-sale scams mentioned in yesterday’s comments that deserve their own post as a resource for people to use to protect themselves. If you have seen other tricks, include them in the comments so we stay aware!
The most common packages:
1. The listing agent spoons his lowball short-sale listing to an investor to start the lender-approval process. Agent then finds the retail buyer, and once the investor closes at the lowball price, they sell it to retail buyer and pocket the difference.
Once a SS investor chimed in here that this is legit because he discloses to the lender that he is buying for the purpose of immediate re-sale for profit. I’m not sure why a bank would agree to that, but we do know that some banks’ short-sale departments are so busy that they will approve sales just to move product, and may not care as much about getting top dollar.
2. The listing agent can’t close the lowball deal so he tacks on a five-figure processing fee or lien-release charge instead. The short-sale processor is complicit though usually paid by buyer so fiduciary conflict there too, though they will claim to be a neutral 3rd party.
3. The investor approcahes the listing agent and agrees to have the LA represent them on the purchase so agent makes 6%. But the investor gets to negotiate the deal with the bank, and they go in ultra-low with or without the agent’s knowledge. If the investor gets it approved, hooray, they put in the standard $15,000 flipper package and make $100,000+ by selling it to the retail buyer they find later. If not, the seller has to start over on a short-sale process before he gets foreclosed.
4. Listing agent appears to expose property to the open market, and fields several offers. Short-sale closes months later for far-under your offer price, and an insider represented the eventual buyer – usually an agent in the same office.
Tell-tale evidence, usually left all over the MLS:
A. The five-second listing, where once the listing is inputted, it is immediately marked pending or contingent.
B. List-price reductions after marked pending/contingent, usually several smaller reductions over months of time.
C. Listing office represents both buyer and seller (listing agent gets a buddy in the office to help diffuse the obvious).
D. None or one photo, or a few terrible photos meant to throw people off the trail.
E. We saw in the news the idea of ‘negative staging’ where they beat up the house prior to appraisal.
F. Widespread abuse of fiduciary duty being inflicted by new and experienced agents, many of whom work at big-name legitimate firms whose managers look the other way.
