Okay, this will surely strike some nerves with those buyers out there trying to purchase a short sale home.   Sorry, but the facts are what they are.

First let me say that I’ve done many Short Sales, representing both the seller and the buyer, and therefore have some insight into the process and situation.

I’ll say it now, and again….   SHORT SALES ARE ALL ABOUT THE SELLER.

Let’s break it down.   The reason why the short sale is all about the seller is simple.  The seller in most cases is in trouble and needs to get out of the financial situation.   The seller has requested the lien holders to approve a short sale (for those who have not heard of a short sale – simply put – it’s when a property is sold for less than what is owed). 

The lien holders are not OBLIGATED to approve a short sale for the seller.  As we have seen over the last several years, not all short sales are approved.   A good majority of them are, but ultimately the lien holders have the final say.   Sadly, we have no control over this.

Now the buyer steps in….places an offer on a property, expecting a great deal and then expects everyone to complete the sale.  It seems that there are still too many buyer agents out there who have not educated their buyer’s.  Again, let me say SHORT SALES ARE ALL ABOUT THE SELLER.    If the lien holder and the seller cannot come to an agreement regarding the terms of the short sale, the seller has EVERY right to cancel the sale.   The buyer cannot force a seller to perform at that point.  This is not normal real estate sales, and the sooner that buyers are educated, the better.

SHORT SALES ARE ALL ABOUT THE SELLER

In the state of Arizona, we have a SHORT SALE ADDENDUM document that is required to be signed by both seller and buyer.  It clearly states that a seller can cancel if the seller and lien holders cannot come to agreement on the sale.   Where does it say that a seller must continue?  No where !   Yet buyers for some reason think they are owed the opportunity to purchase the property.

Many of us know what it’s like to have a short sale listing with a buyer offer (remember it is just an offer) and the buyer decides to cancel after 60-90 days of work and effort have gone into the transaction.  Frustrating…..you bet.   Now turn the tables and we have a situation where a seller has attempted a Short Sale.  The lien holder has done there due diligence and determined that they will not approve the short sale for whatever reason.  At this time the seller has no choice but to cancel the short sale offer with the buyer.  

So let me ask you….why would the buyer want to continue?  Perhaps they were still trying to meet the $8000 homebuyer tax credit deadlines. Or it’s truly their dream home and can’t live without it.  

Since the lien holder has denied the short sale, what possible control does the buyer have?   Again…. SHORT SALES ARE ALL ABOUT THE SELLER.   The buyer has no control and cannot force the seller to perform.   The offer was not accepted by the lien holder.   The buyer should move on to another purchase (and yes there are plenty of great homes out there).

As a work with buyers I make sure that I repeat over and over again to them…..there is no guarantee on Short Sales.   If the buyer has deadlines to meet, perhaps an REO or regular sale is in the best interest.   Short Sales are not for all Buyers, regardless how great a deal they could possibly get.

As many more people fall behind on their mortgage payments, so it seems does the ability to pay HOA dues.  Many assume that the short sale or foreclosure will resolve any missed HOA payments, penalties and even attorney fees.   The fact is, the debt will survive foreclosure and will most certainly reak havoc for the short sale process.

HOA’s have more Power than we think.   They have the ability to follow the individual after a foreclosure.  While a short sale requires resolution to clear title, the past HOA dues and penalties can nix a deal.  

In Arizona there are so many foreclosures and short sales, where homeowners have not paid the dues.   These bills have mounted up, and in some communities have caused serious financial hardship to the HOA management – which in effect – impacts those still living in the community and paying their dues.   The current homeowners are feeling the affects of the HOA debts.

Take for example the community that has over 75% of the homes in either foreclosure or short sale status.  Imagine all or even half, of these homes are behind on their dues.  The money that is collected was to be used to maintain the streets, community common areas, landscaping, and even lighting.   Now this particular community’s HOA is so far behind, the HOA has stopped landscape, street and common area maintenance.  If that isn’t bad enough for the remaining homeowners, the street lights were turned off due to the inablity of the HOA to pay the bill.  

While we understand the hardship many homeowners are going through in paying their mortgage and other bills, there are some steps that can be taken to avoid the HOA issues.   First, if you are planning to short sell your home, continue to pay the HOA.   If not, this will only come back to bite you in the end.   Banks are not paying past HOA dues or penalties.  If you have not paid your dues, you are not only incurring monthly penalties, but could also be levied additional attorney fees when the HOA decides to exercise their option to persue you.  The bank will not pay for these, and buyers are smart enough to recongnize they aren’t responsible and will refuse to pay them as well.  That leaves the Homeowner. 

If it is impossible for you to continue paying HOA dues during your short sale…..be prepared for the end.  Remember that HOA’s are liens to the property and must be cleared in order to complete the short sale.   In some cases, the HOA will negotiate with you for a reduced number.  For example a recent homeowner had an HOA debt of  $3,500 and the HOA accepted $1,200.  There is no guarantee that the HOA will negotiate, so be prepared either way.

HOA’s and their lien on a property can be the kiss of death to a deal.    Make sure you are communicating with your HOA – it will go a long way to resolving the debt when the time comes.

If you are considering short selling your home, don’t hesitate to call or email us for more information

If you had mortgage debt forgiven this past year, whether it was through a short sale or perhaps mortgage modification then you may be able to claim special tax relief and exclude the debt forgiven from your income. That is because the Mortgage Debt Forgiveness Debt Relief Act of 2007 allows for owners of primary residences to avoid paying taxes on this forgiveness under certain circumstances. Here are 10 facts directly from the IRS in regard to the Mortgage Debt Forgiveness as we approach the April 15^th tax filing deadline:

1) Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2) The limit is $1 million for a married person filing a separate return.

3) You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4) To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5) Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6) Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7) If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

9) If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10) Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, please visit http://www.IRS.gov and as always consult a tax professional with specific questions you may have.

1. “Pay us $1,000, and we’ll save your home.”
Some legitimate housing counselors may charge small fees, but fees that amount to thousands of dollars are likely a sign of potential fraud – especially if they charge up-front, before the ‘counselor’ has done any work for you. Be wary of companies that require you to provide a cashier’s check or wire transfer before they take any action on your behalf.

2. “I guarantee I will save your home – trust me.”
Beware of guarantees that a person or company can stop foreclosure and allow you to remain in your house. Unrealistic promises are a sign that the person making them will not consider your particular circumstances and is unlikely to provide services that will actually help you.

3. “Sign over your home, and we’ll let you stay in it.”
Be very suspicious if someone offers to pay your mortgage and rent your home back to you in exchange for transferring title to your home. Singing over the deed to another person gives that person the power to evict you, raise your rent, or sell the house. Although you will no longer own your home, you still will be legally responsible for paying the mortgage on it.

4. “Stop paying your mortgage.”
Do not trust anyone who tells you to stop making payments to your lender and servicer, even if that person says it will be done for you.

5. “If your lender calls, don’t talk to them.”
Your lender should be your first point of contact for negotiating a repayment plan, modification, or short sale. It is vital to your interests to stay in close communication with your lender and servicer, so that understand your circumstances.

6. “Your lender never had the legal authority to make a loan.”
Do not listen to anyone who claims that ‘secret laws’ or ‘secret information’ will be used to eliminate your debt and have your mortgage contract declared invalid. These scammers use sham legal arguments to claim that you are not obligated to pay your mortgage. These arguments don’t work.

7. “Just sign this now; we’ll fill in the blanks later.”
Take the time to read and understand anything you sign. Never let anyone else fill out paperwork for you. Don’t let anyone pressure you into signing anything that you don’t agree with or understand.

8. Call 1-800-Fed-Loan
This may be a cam. Some companies trick borrowers into believing that they are affiliated with or are approved by the government or tell you that you must pay them high fees to qualify for government loan modification programs. Keep in mind that you do not have to pay to participate in legitimate government programs. All you need to do is contact your lender to find out if you qualify.

9. “File for bankruptcy and keep your home.”
Filing bankruptcy only temporarily stops foreclosure. If your mortgage payments are not made, the bankruptcy court will eventually allow your lender to foreclose on your home. Be aware that some scammers will file bankruptcy in your name, without your knowledge, to temporarily stop foreclosure and make it seem as though they have negotiated a new payment agreement with your lender.

10. “Why haven’t you replied to our offer? Do you want to live on the streets?”
High-pressure tactics signal trouble. If someone continually contacts you and pressures you to work with them to stop foreclosure, do not work with that person. Legitimate housing counselors do not conduct business that way.

When thinking of doing a short sale, be prepared with documentation the banks will request.

Simular to when you purchased a home, negotiating a short sale is like a reverse purchase and requires certain documents.

Have the following information ready:
– Bank or Lending Institution and Loan #
– Last 2 years of tax returns
– Lastest 2 months of bank statements
– Latest 2 paystubs

Create a filing system so that you can continue to add to the file, as the banks will request updated information during the short sale process. Keeping a good file system in place will remove some of the stress of finding documents when needed.

If you have any questions about the Short Sale process, we provide FREE confidential consultations. Don’t hestitate to contact us.

Rivera/Mueller Team
Al Rivera @ 602-750-7141
Brigitte Mueller @ 480-620-8593

Let’s face it, there are many of us struggling on a day to day basis to stay on top of our monthly bills. The rate of unemployment climbs, the rate on our mortgages climb, and many of us have fallen behind.

The so-called Loan Modification programs out there have not saved those in trouble. The percentage is so low and the reality is that it does not resolve your problem. It may give you temporary relief, if that, and while you are waiting for the banks to modify your loan you are falling further and further behind. It’s a known fact that you cannot short sell your home when you are in the loan modification cycle, and by the time you find out you don’t qualify for the modification – you are so far behind there is no hope of catching up.

The sad truth is that many of us must give up our homes, but think twice before you go to foreclosure. Foreclosure may not be the best solution for you.

While selling your home may be a tough decision, the dream of homeownership is NOT dead. A typical homeowner can purchase a new home within 2-3 years after the short sale of their current home, while a foreclosure prevents you from purchasing for 7-9 years on average.

We offer FREE private consultation to help answer your questions about the option of a Short Sale.

Give us a call.

Rivera/Mueller Team

Brigitte @ 480-620-8593
Al @ 602-750-7141

By Danielle Hale, NAR Research Economist

Buy a home and you get a tax break! As part of the Housing and Economic Recovery Act of 2008, a First-time Homebuyer Tax Credit is now available. However, this limited-time tax break ends in mid-2009. A homebuyer tax credit has been available for first-time homebuyers in Washington, D.C. for many years, and now first-time homebuyers nationwide can take advantage of a similar benefit. In this commentary, I’ll give a quick overview of the credit-something every Realtor® should know.

Who is Eligible?
First-time homebuyers who purchase a principle residence on April 9, 2008 and before July 1, 2009 are eligible for the credit. A first-time homebuyer is someone who has not owned his/her principle residence for a 3-year period before the date of purchase, and someone who has never taken advantage of the DC first-time homebuyer credit. In the case of married couples, both must be first-time homebuyers. For other groups purchasing a home, the statute is unclear. Purchasers should consult a tax advisor.

How does it work?
The credit directly reduces the total amount of taxes owed and is refundable. When the buyer files his/her taxes, for the year he purchased his home (2008 or 2009), he will be able to subtract the amount of the credit from his Federal income tax liability, increasing his refund or reducing the amount he owes.

How big is the tax credit?
The tax credit is equal to 10% of the purchase price of the home up to $7,500. The full credit is available for single buyers whose adjusted gross income is less than $75,000. If the buyer’s adjusted gross income is greater than $75,000 and her home purchase qualifies her for the full credit, the credit phases out according to the chart below.

For married couples filing jointly, the credit begins to phase out at an adjusted gross income of $150,000 per this chart.

What about Repayment?
The tax credit is not completely free money for buyers to keep. It has a payback provision that makes it similar to an interest free loan. Two years after the credit is claimed, buyers begin repayment so that the credit is paid back in full over the course of 15 years. For those qualifying for the full credit, the payback amount is $500 per year. Those getting less than the full credit pay equally over the 15 years (which is a rate of 6.67% per year). If a qualifying home is resold before the credit is repaid, the seller will have to immediately pay the outstanding balance of the credit. If the home is sold at a loss, then nothing more is owed.

What’s valuable about a credit you have to repay?
Money today is worth more than an equal amount of money in future, which economists call the time-value of money. First, money loses its purchasing power over time due to inflation. Second, you can use the money today to earn interest and repay the principal later-all the while keeping the interest for yourself. For this reason, multimillion-dollar lottery winners prefer taking a lower lump-sum amount than the multimillion dollar amount spread out over many years. Real examples in the PDF will help you illustrate this point to potential buyers.

Are there other conditions I should know about?
• Buyers cannot claim both the DC and the national First-time Homebuyer tax credit
• Purchases by non-resident aliens and purchases financed by proceeds from a qualified mortgage issue are not eligible.
• Any single family residence located in the United States that will be used as a principal residence is eligible. Generally, this is the place where an individual spends most of his/her time. This includes single-family detached housing, condos or coops, townhouses or any similar type of new or existing dwelling.
• The credit will not result in an individual owing additional federal taxes under the Alternative Minimum Tax.
• Home purchases between relatives and other gifts of residences are not eligible for the credit.
• Other tax benefits of homeownership are still in place. Mortgage interest deduction, capital gains tax exclusion, and property tax deduction are some well-known examples.
For more specific questions about the tax implications of the credit, please consult a tax professional.

There’s no denying it — remodeling, repairing and decorating your home can be an expensive undertaking. But with a little creativity and some wise shopping decisions, you’d be surprised at how much you can save on your next project!

Lumber: There are a number of different lumber grades available, and the higher grades also carry higher price tags. If you don’t need the increased structural capacity or better appearance of the higher grades, save some money by selecting a lower grade that’s appropriate for the intended use. Also, many lumber yards have piles of lumber that are culled out because it’s warped, split or otherwise unsuitable for sale at full retail. You can often pick this material up at sizable discounts, and it’s perfectly good for jobsite uses such as blocking, temporary bracing, etc.

Beams: Another place to save some money is with the purchase of beams. Many structural-engineered lumber beams come in long lengths that are cut on site at the lumber yard, leaving drops that are too short for long spans. You can often pick these up cheap, and they can be used as headers for doors and small windows, or in other framing applications.

Large versus small packaging: Some construction items, such as nails, screws and other hardware, are available in both small and large packaging. Buying in larger packages saves you money on a per-pound basis, so long as you have a need for the items now or in the foreseeable future. If you only intend to use a few of the items, you’re better off buying the smaller packages — even though you pay a little more per pound, you don’t waste money on excess you’ll never use.

Bulk buying: Along those same lines is buying in bulk. Items such as sand, topsoil, gravel, bark, and other bulky construction and landscaping materials can be purchased in bags, but you really pay a premium on a per-cubic-yard basis for that convenience. If you have a pickup truck or a small trailer, picking these materials up yourself in bulk will save you quite a bit of money. For even larger quantities, paying a small fee to have them delivered will still result in a sizable per-yard discount over bagged material.

Concrete: For small jobs such as setting a fence post, you can’t beat the convenience of bagged concrete mix. But once your project gets up around a quarter of a cubic yard, bagged concrete becomes a whole lot harder on both your wallet and your back. Many towns have small-yardage concrete companies that are much more economical, and you can also have a full-size concrete truck deliver the wet material for a very reasonable “short-load” fee.

Small pieces of plywood: Many home centers and lumber yards have smaller, precut pieces of plywood and other materials, and you can save yourself some money if you only need a small piece for a one-time project. However, these small panels are quite expensive on a per-square-foot basis, so if you have a future need for the plywood and a place to store it, you’re definitely money ahead by buying a full sheet and cutting it yourself.

Tools: When a home-improvement project calls for a particular tool that you don’t currently have, consider how often you might use that tool in the future. If it’s a basic item, such as a circular saw or even a paint brush, that will see a lot of use over the years, then buy the best you can afford. It’s safer, easier to use, and its long life will more than pay for itself when compared to cheaper tools that require periodic repair or replacement. A tool you might only use a few times could be a lesser expensive model, so long as it’s safe. If the tool will more than likely be a one-time use, consider renting instead of buying.

Sweat equity: Got a little more time than money? If you’re having work done on your home, talk with the contractor about what things you can reasonably do — and the key word is reasonably — to save some money. Perhaps you can do your own painting, or scrap things out and clean up the site at the end of each day. But whatever your agreement is, get it in writing!

Seconds, roll ends and discontinued items: Many retailers have items such as appliances and plumbing fixtures that they sell at sizable discounts because they are slightly blemished, have minor scratches or are in the store because someone misordered them. Flooring companies often have “roll ends” of carpet and vinyl for sale at a fraction of their original price, and that are perfect for smaller rooms. Many paint stores will have sales on mismatched or mistinted paint, or wallpaper that was misordered. Tile stores often have a sizable inventory of discontinued tiles, stones, grouts and other materials at great prices. If you can be a little flexible and creative in your design thinking and are willing to do a little research, you’ll find there are bargains all around you!

The top findings were collected responses from buyers who recently purchase a home and reported in the NATIONAL ASSOCIATION OF REALTORS®’ 2007 Profile of Buyers’ Home Feature Preferences.

1. What single home feature do buyers say they want most in a new home?

Central air conditioning – Staying cool is important to buyers in all regions of the country. Nearly three-quarters of home buyers ranked central air conditioning as “very important” for their new home, and 83 percent of buyers purchased a home with central air. Other highly desired home features: a garage for two or more cars (57 percent), a walk-in closet in the master bedroom (53 percent), and a backyard or play area (50 percent).

2. What’s the median size of homes purchased between late 2005 and early 2007?

1,840 square feet – Home sizes are growing. The size of the typical home purchased by survey respondents increased by 100 square feet since 2004, according to the survey results. Meanwhile, the median age of recently purchased homes decreased to 12 years from 15 in that same time span.

3. Repeat buyers tend to be choosier than first-time buyers. In particular, repeat buyers place much more emphasis on these home features:

Oversized garages and master bedroom walk-in closets – Sixty-five percent of repeat buyers said they wanted a garage with two or more spaces, compared with 41 percent of first-time buyers; 61 percent said they wanted a walk-in closet in the master bedroom, compared with 38 percent of first time buyers. Although repeat buyers placed more importance than first time buyers on nearly all home features surveyed — with the exception of a backyard or play area, and proximity to work — big garages and walk-in closets are two features that repeat buyers were much more likely to seek in their new home.

4. Within three months after buying a home, nearly half of all buyers remodeled or made improvements to which part of the house?

Kitchen – Six in ten buyers took on remodeling or home improvement projects soon after buying a home, according to the survey, and the kitchen was most often involved. Nearly half (47 percent) of home buyers remodeled or made improvements to their kitchen within the first three months. Other common projects include remodeling bathrooms and bedrooms, and adding new appliances and lighting. Overall, the typical buyer spent $4,350 on home improvement projects within the first three months.

5. Which home feature saw the biggest jump in buyer popularity since 2004?

Oversized garage - The most significant change between the 2007 survey and the previous 2004 survey was in the number of buyers who said oversized garages were important in their home purchase decisions. In that time frame, oversized garages (for two or more cars) gained 16 percentage points to 57 percent. What’s more, 56 percent of buyers who purchased a home without an oversized garage said they would have paid extra for one, while in the 2004 survey only 6 percent said they’d be willing to pay extra. Other features growing in popularity: hardwood floors, granite countertops, and cable readiness.

6. What three features did buyers say they’d be most willing to pay extra for in a home?

Central air conditioning, walk-in closets, and hardwood floors – Buyers aren’t afraid to spend money on the features they really want, according to the survey. Sixty-five percent said they’d be willing to pay extra for central air conditioning — in fact, they’d pay a median of $1,880 extra for a home with it. Sixty percent said they’d pay extra (a median of $870) for walk-in closets, and 57 percent said they’d pay more (a median of $1,900) for hardwood floors. Buyers were willing to pay the most for a waterfront property, an extra $4,760.

7. A home’s energy efficiency is most important to which segment of buyers?

New-home buyers - Of all buyers, nearly half reported a home’s energy efficiency was “very important”, but new-home buyers were particularly concerned. Sixty-five percent of buyers of homes one year old or newer said energy efficiency was “very important” in their home search. On the other hand, 32 percent of those who purchased homes 51 years or older said energy efficiency was “very important”.

8. Where do first-time home buyers tend to purchase a home?

Suburb or subdivision – Suburbs are still the most popular place to live, even for first-time buyers. Slightly more than half of this buyer segment purchased a home in a suburb or subdivision, compared with 20 percent who purchased a home in an urban or central city area, and 20 percent in a small town. Only 10 percent of first-time buyers bought a home in a rural area.

9. What’s the most common type of home purchased?

Single level – Overall, 47 percent of buyers purchased a single-level home, while 44 percent of buyers purchased a two-level home. Nine percent of buyers bought a home with three or more levels. In general, the older the home buyers, the more likely they are to buy a one-level home.

10. What did new-home buyers most wish their home had more of?

Storage – Can a home ever have enough storage? Nearly half of new-home buyers said more storage space would make their residence ideal. Among all buyers — of homes both old and new — 40 percent would have preferred more closets and nearly 60 percent wish for a larger kitchen. Regardless, more than 90 percent of home buyers said they are satisfied with the home they purchased.