first time buyer credit

Gov short sale guide

What if your agent is not what you expected?

You say,  “No!  I have the best agent!”  She is the number one agent for this, that and some other thing, she drives an expensive car, demonstrating her success, and she knows your Aunt Jinny’s second cousin Julie.

So, why did she ask you to sign an exclusive buyer agreement?  It’s a matter of trust.

In my series of articles  “Is my Agent Lying to Me?” the core lesson, was trust.  The primary reason an agent requires a buyer to sign one of these agreements is usually their lack of confidence to provide superior service.   They don’t ‘trust’ that you will be satisfied and you will wander off and use a new agent.

Usually,  a buyer will only change agents when their specific needs are not being met.  A sub par agent, your Aunt Jinny’s  second Cousin’s friend, will figure,  ‘Hey, if I get an exclusive agency contract they can’t use someone else’.

Ok.  What if you hired a Realtor who went above and beyond to provide high quality service?   Your expectations would be exceeded and the need for a buyer agent agreement would be nil.

Sounds great except…few agents actually will.

The one scenario where a buyer contract will benefit you is when you want one.   You could be tricked into signing one when you don’t need it, read carefully.

For example, if you were looking to buy the most affordable home in a very desirable area say for instance, a Los Gatos short sale, you want to be sure your Realtor is not working with another buyer interested in the same Los Gatos property.

To be sure, ask your Realtor if they are representing other buyers looking for the same kind of Los Gatos house .  If the answer is yes then you request an exclusive buyers agreement.

If  you are asked to sign an exclusive buyer agreement be sure you understand why.  Is it because this agent is a slacker?   Do they have another buyer looking for short sales in Los Gatos?

You may be asking if the author has used a buyers agreement.   There was one time when I wished I had.

A call came into my office about one of our listings and the buyer claimed they were not working with a Realtor.  They wanted to see the home right away.   We set an appointment and I gathered all the information they needed to compare the home to other similar homes to help them determine the value.   They were so thankful!

Well, they had a Realtor.   Their Realtor had told them to search for homes, choose those they liked and to call the listing agents to show them.  He told them to call him when they wanted to buy one.  They did exactly that and I had no exclusive buyers agreement.

Live and learn, right?

I can live and learn.   I will represent many buyers and sellers every year.    Will you buy and sell several houses this year?  Can you take the chance to live and learn?

No.  You have one chance to get the best home.   Find the best suited Realtor, build trust and have fun making your dream come true.

Realted article..

http://hubpages.com/hub/Hiring_a_Buyer_Agent

Q:  Short Sale definition.  What is a Short Sale?

Answer: In ”short”, a shortsale is when the lender agrees to settle the debt owed on the property for less than the full amount of the debt. In most cases “Settled” means the lender writes off the debt. You usually will receive a 1099 after a short sale for the amount of debt forgiven. The bank is agreeing not to go after you for the money they lost by filing a deficiency judgment in the future. The exception is the HELOC loan where they reserve the right to file a default judgment.

Answer: If you have a heavy asset portfolio that would cover the amount above the home’s value then the answer is likely to be no.  Each case is different and would be better answered after a professional review to help learn how to short sale.

Answer:  There is a lot of misinformation on the internet about this. A short sale is recorded on your credit report as “debt settled for less than the amount owed”.  In plain English, this will result in a relatively minor hit to your credit compared to a foreclosure or late payments on your mortgage. A short sale will affect everyone’s credit differently. The more established your credit, the less of an impact it will have on your score.

If you stop making your mortgage payments for 4 months, regardless of whether you do a short sale or not, 4 months of missed mortgage payments will have a significant negative impact on your credit.  A short sale will drop your credit 100 points or more.

If you are already behind on your payments, you have already incurred the majority of the hit that a short sale will have on your credit.  Moving forward with a successful short sale will insure that your debt is settled with your lender.

However, if you are current on your payments and can stay current throughout the short sale process, you will save your credit to a large extent.

When you do a short sale, your lender is agreeing to settle the debt on the property for less than the amount they are owed. As a result the IRS allows them to write off this loss, which is why your lender will send you a 1099-C after the short sale.

The IRS considers “debt relief” to be income for tax purposes. If your lender writes off $20,000 on your short sale, they will send you a 1099-C for that amount, and you would include that when you file your income taxes. The “C” stands for “Cancellation of Debt” and the law says canceled debt is taxable as income.

However there are EXCEPTIONS that most people who do a short sale qualify for, excluding them from having to pay taxes on their short sale.

Thanks to the Mortgage Tax Debt Relief Act that George W. Bush signed into law in January of 2008, homeowners who do a short sale on their primary residence, and have a purchase money loan (in other words, they have not pulled cash out of their home with a cash-out refinance HELOC) pay no taxes on the loss that their lender incurs in a short sale.

What is… pull cash out/Equity?
Answer: Homeowners who have pulled out cash from their home but have put that money back into their home to “substantially improve” their home, also are excluded from taxes on the short sale.

All other short sale scenarios – if you pulled cash out on your primary residence and spent it on something other than upgrading your home or if you are doing a short sale on a second home or investment property – result in a taxable event unless you qualify for the “Insolvency” exclusion.

The IRS does not require you to pay taxes on the loss the lender takes in a short sale if, at the time of the short sale, you are insolvent. “Insolvency” means your debts (including your mortgage) exceed the value of all your assets. In other words, if, at the time of the short sale, you have more debt than you do money or assets, you are considered insolvent.

Many people who short sale are insolvent and excluded from paying taxes on a short sale. I recommend you check with your accountant or  IRS form 982, which is the IRS form for debt relief and short sales. The IRS gives an explanation of “Insolvency” on this form.

Answer: California has passed its own version of the federal Mortgage Tax Debt Relief Act. It is Senate Bill 1055, which conforms to the federal law described in detail above, but applies to California state income taxes on a short sale.

There are differences between the state and federal law.

The term of the California law was only until the end of 2008. As of Jan 2009, this law is no longer in effect.

However,  CA, Tax Code Section 17131 provides that, unless there is some specific California statute to the contrary, California law tracks federal law on what income is excluded from taxation. Since there is currently no specific California law on this issue, short sales do not produce taxable income under California law as long as the Federal Mortgage Tax Debt Forgiveness Act is in effect (until the end of 2012).

I recommend you speak with your accountant and have them answer any tax questions that you have. I am not a tax accountant and do not give tax advice.

Answer:   The whole point of a mortgage short sale is to get out from under the debt of the mortgage. Your lender cannot write off their loss on their corporate taxes, send you a 1099-C, so you have to pay taxes on the loss, report the short sale as a “settled debt” on your credit and then turn around and go after you for the money.

This is why your lender will send you a 1099-C after the short sale. The “C” in “1099-C” stands for “Cancellation of Debt.”

Hiring an inexperienced short sale consultant or negotiator who does not negotiate a FULL release from your lender, could result in the liability becoming yours for the money the lender loses in a short sale or you could find yourself being forced to sign a promissory note to close escrow.

Answer: In most cases where people have a first and a second loan, they often are with 2 different lenders. For the short sale process to close escrow, both lenders have to agree to the short sale and agree to settle the debt. Thankfully, both lenders have a vested interest in doing this. The lender with the first loan does not want to foreclose, and therefore is willing to give a little money to the second in order to get them to agree to the short sale.

The second lender will get nothing if the first mortgage forecloses.  The attitude that something is better than nothing is becoming more prevalent.

The difference between these two loans is that in a “recourse loan” the lender has recourse to go after the borrower for the money they lose in a foreclosure, technically.  For this to take place, the lender has to file a judicial foreclosure, which is rarely done in CA.

The majority of foreclosures in CA are “non-judicial” foreclosures, where the property is sold at a trustee sale.

Answer: You will know that you have been released from the debt right on the front in plain English. “releasing the lien”, “accepting a short payoff to satisfy the lien”, “reporting the sale as a settled debt to the reporting agencies”, “issuing a full satisfaction of the mortgage”, “not pursuing a deficiency judgment”, or some other variation that states they are settling the debt for less than what they were owed.

More importantly, your bank will issue a 1099-C to you, the borrower, after the short sale, confirming that the debt has been written off and is settled. Your lender cannot write off the debt, issue a 1099-C and subsequently go after you for the deficiency.

Answer: Many people ask this question: The primary advantage is that in a short sale, the debt is settled and you no longer owe the bank any money. If you foreclosure, you may still be liable for the deficiency in the event that the bank files a judicial foreclosure.

Secondly, in a short sale, your credit takes much less of a hit compared to a foreclosure.

Finally, Fannie Mae & Freddie Mac revised their guidelines in August of 2008 with regard to how they view borrowers who have filed bankruptcy, gone through foreclosure or done a short sale. Through these new guidelines, they are in effect severely penalizing those who go the route of foreclosure or bankruptcy, and rewarding or encouraging those who do short sales, which they view as the borrower doing the responsible thing in light of the circumstances.

Recent Fannie Mae / Freddie Mac guidelines stated borrowers, filing bankruptcy or foreclosure, may have to wait up to 7 years to buy another home.

In contrast, the new guidelines stipulate only a 24 month period after a short sale.

Answer: I have yet to hear a good premise for letting your home go to foreclosure vs. short sale. Depending on whether you have recourse or non-recourse loan, when you let your home go to foreclosure you either run the risk of being liable for the deficiency amount or liable for the income taxes on that loss.

Secondly, your credit will drop up to 400-500 points and you will not be able to buy a home or obtain respectable credit for up to 7 years.

Comparison: With a short sale, the lender agrees to SETTLE the debt for less than the amount owed. If you have a recourse loan, you may be liable for income taxes on the lender’s loss (just as in a foreclosure) but you will not be liable for the deficiency (and if you qualify for the “Insolvency” exclusion, you will avoid the income taxes as well).

Furthermore, the loss that the lender takes in a short sale will be MUCH LESS than the loss the lender will incur following a foreclosure. The foreclosure process takes months & months, at the end of which the lender has to process the property through its overwhelmed system (another 3 -5 months) and then put the property back on the market, all while the market forces move against them.

Most importantly, the impact on your credit from a short sale will be significantly less than with a foreclosure and you will be able to buy again within 2 years, in most cases, compared to a 7 year waiting period to buy a home following the path of foreclosure.

Answer: Nothing –lender pays all closing costs, escrow fees, commissions etc. The lender may also pay any outstanding property taxes if negotiated properly.

Answer: The short sale process typically takes from 2-4 months, start to finish. It can take longer depending on the subject lender, the abilities of your chosen professional and your personal level of determination. You can choose to live in the property for the entire duration of the short sale or you can simply move out whenever you wish.

Answer: No, however lenders are known to be more motivated if you are not making payments or behind.   If you have a forbearance agreement it should not affect the commencement of a short sale.

Answer: You will be better represented in a short sale by an experienced Realtor who practices real estate sales on a daily basis.  A Realtor is an integral part of the short sale and possesses the experience to market your property aggressively in order to attract, screen and deliver buyers to successfully execute the sale.

With that said a word of caution.  Many attorneys seem to be preying on the fear and desperation of people facing foreclosure. Their websites use scare tactics to make people think that they would be crazy to do a short sale without first hiring an attorney.  They wrongly attorneys as the only people qualified to interpret a short sale approval, and that hiring an attorney is normal and an accepted part of doing a short sale, like hiring an attorney for divorce proceedings.

The overwhelming majority of short sales are conducted by real estate brokers who are experienced at negotiating with the lenders and charge NO UPFRONT FEES for their services.   You can hire a realtor who employs a team of professionals that include an advising attorney to help.

The California Foreclosure Consultant Act (July 1 2009) applies to foreclosure consultants – those who collect an advance fee for modifying loans or helping borrowers avoid foreclosure in situations where a Notice of Default has been filed on the property. This Act has an exclusion in it Realtors
Per CA Civic Code and the CA Assoc of Realtors, The California Foreclosure Consultant Act does not apply to real estate agents facilitating a short sale except in the extremely unusual event that an agent is 1) Making a direct loan for a residence in foreclosure, 2) Acquiring an interest in a residence in foreclosure, 3) Receiving an advance fee before performing services for a residence in foreclosure, or 4) Assisting an owner in obtaining the remaining proceeds if any from a foreclosure sale of an owner’s residence.

Chapter 13 encompasses setting up a 3-5 year repayment plan to repay debts. It requires you have a steady income, as you will be repaying all of your debt. Both have a very negative impact on your credit and remain on your credit report for 10 years.

Due to the new 2005 bankruptcy law, which raised the bar for people to qualify for Chapter 7 “fresh start” bankruptcy proceedings, fewer and fewer people pass the “means” test to qualify for Chapter 7 and for this reason can only qualify for Chapter 13 bankruptcy (a 3-5 year repayment plan).

Chapter 7 Bankruptcy, in a foreclosure stay process, allows the bank trustee to choose the Realtor and the price for the impending bankruptcy sale of your home.   While a Chapter 13 allows you to have some control of the sale of your home and who you employ.

Unfortunately, both Chapter 7 and Chapter 13 temporarily delay foreclosure proceedings, neither allows you to keep your home unless you can bring your mortgage current.

Answer: NO. Many agents have no interest in doing short sales because they require a tremendous amount of time and expertise. If you don’t know what you are doing, they often go to foreclosure.   93% percent of short sales do not sell due to poor representation.

You get one shot at doing a short sale – if your Realtor has not learned the many strategies, necessary, through experience, you will likely find yourself in a foreclosure proceeding.

Tip:  Taking  action quickly will serve you well in preventing foreclosure through the short sale process.

Our Short Sale team is qualified to provide professional advice and the ability to secure short sale approvals  in all 151 counties in California and refer other tested professionals throughout the Nation upon request.

this faqs document created in collaboration with Justin DeCesare SdHomeGuy.com

131 Millrich Dr.  this Los Gatos house sold for nearly 1% less than the asking and 411 Clearview Dr., a townhome, sold for nearly 5% over the listing price !

A reminder that ’sweet spotting’ your asking price will always pay off.

The good news….neither property was a short sale.

2 Los Gatos Houses sold this week,

131 MILLRICH DR, Los Gatos 95030 (Los Gatos)Single Family Home 3 bed(s) Baths: 4|1 bath(s)   SqFt: 2,593  Lot: 9,100 sq ft

List Price: $1,449,000     Sold Price $1,332,000.00

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411 CLEARVIEW DR, Los Gatos 95032 (Los Gatos)Townhouse  3 Beds, 2|1 Baths:  SqFt: 2,122 Lot: 2,220 sq ft

List Price: $749,000 Sale Price: $780,000

Assoc. Fee: $428

We see a crossroads ahead…one where the buyers in the Los Gatos Real Estate Market aren’t in the driver’s seat.    Could this mean the homes for sale are in a Seller’s market?

Remember…

Spring is coming and the end of the $8000 First time buyer’s credit is there waiting.   I wonder if will  lead to more vigorous sales?…bidding?

Tait Ave Home Sold In Los Gatos

You can do a detailed search for homes available for  sale in the  the Los Gatos Real Estate market here.

The purchase of a fixer-upper house is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased. Fixing up your new house is a costly idea in Los Gatos, San Jose and the whole Bay Area, really.

HUD’s 203(k) program can help you overcome this cost obstacle by enabling you to purchase or refinance a property plus the cost of making the repairs and improvements in one mortgage.

Dian Hymer of Inman News suggests “design your offer with a 60 day close and a 45 day finance contingency.”

The FHA-insured 203(k) loan is provided through approved lenders nationwide and is available to persons wanting to occupy the home

The 203(k) loan includes the following steps:

1. A potential homebuyer locates a fixer-upper and executes a sales contract after doing a feasibility analysis of the property with his/her real estate professional. The contract should state that the buyer is seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the lender.
2. The homebuyer then selects an FHA-approved 203(k) lender and arranges for a detailed proposal showing the scope of work to be done, including a detailed cost estimate on each repair or improvement of the project.
3. The appraisal is performed to determine the value of the property after renovation.
4. If the borrower passes the lender’s credit-worthiness test, the loan closes for an amount that will cover the purchase or refinance cost of the property, the remodeling costs and the allowable closing costs. The amount of the loan will also include a contingency reserve of 10% to 20% of the total remodeling costs and is used to cover any extra work not included in the original proposal.
5. At closing, the seller of the property is paid off and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.
6. The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments (PITI) put into the cost of rehabilitation if the property is not going to be occupied during construction, but it cannot exceed the length of time it is estimated to complete the rehab.
7. Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of the job, 10% of each draw is held back; this money is paid after the lender determines their will be no liens on the property.

Dian Hymer of Inman News suggests “design your offer with a 60 day close and a 45 day finance contingency.”

Now,  what are you waiting for?   Call your Realtor and find a fixer..Quick!

Image via Wikipedia

5 New HomeOwners and 5 Successful Sellers makes for great news this past week.

220 BERSANO LN, Los Gatos 95030
$1,729,000 Beds: 4 bed(s) Baths: 3|0 bath(s)

17050 Wild WY, Los Gatos 95030
$1,485,000 Beds: 3 bed(s) Baths: 2|0 bath(s)

16345 LOS GATOS BL #49, Los Gatos 95032 (Los Gatos)
$510,000 Beds: 2 bed(s) Baths: 1|1 bath(s)

30800 LOMA CHIQUITA RD, Los Gatos Mtns 95033 (Los Gatos Mtns)
$159,000   Raw Land

14685 OKA RD #11, Los Gatos 95032 (Los Gatos)
$140,000 Beds: 3 bed(s) Baths: 2|0 bath(s) Mobile Home

There are 12 new Los Gatos listings for the week you can see these new listings using comprehensive search tool on my home page.