Michael Roberts' Blog -San Jose Homes, Real Estate and Houses for Sale

The Debt Relief act of 2007 has been revised and every Seller considering a short sale better brush up!  Tax  Software has yet to be updated and one needs to get the new form 982 from the IRS or Post Office.  Those extensions are due!!!!

From the official IRS website:

The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.

The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).

The debt must have been used to buy, build or substantially improve the taxpayer’s principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).

Note: Legislation enacted in October 2008 extended this relief through 2012. Thus this relief now applies to debt forgiven in calendar years 2007 through 2012.

This question is asked of me everyday.   A short description of the differences should be addressed first.

Since Short Sales are more prevelant than REOs I will start there.    A Short Sale is , simply, the process of selling a home for less money than is owed to the mortgage company.   Commonly found in San Jose today,  the pitfalls of buying this type of home are many, it is important to realize it can be done however, the final price is determined by the bank.

Once the seller has accepted an offer, the listing agent, subsequent to submitting the third party authorization to communicate on your behalf, will submit it to the banks representative for approval.   The party to which the agent is communicating may only be representing the bank…a servicer.  This means we have now added a new layer.  How many times have you heard “I want it from the horses mouth”?  Well, it is not likey the horses mouth will be speaking.  It takes several days and sometimes weeks for your offer of Short Sale to be assigned to a negotiator (loss mitigation specialist) who will then begin the process of reconciling the numbers.

A BPO (broker price opinion..basically,  a market analysis) will be ordered to learn the market value of the property and a financial statement will be required from the seller.  Actually, what the seller has to produce is a very long list.   None of this can happen until the seller’s agent has packaged the offer correctly.    Mistakes here will set the procees back even further.  An experienced agent is paramount in these sale situations.  This is no place for a newbie.

If all is done well the  sale can proceed per the purchase contract.   The date that the bank approved the short sale is the ”actual date” the contract timelines begin.   This applies to REO sales too.

An REO, on the other hand, removes the seller’s emotions and other complications from the real estate equation.    Getting it “from the horses mouth” is bit more likely.   Still, there are servicing companies negotiating for the bank in most cases.    

Many buyers want to make offers below the asking price of an REO.   This can be fraught with problems.    The bank already priced the property according to a number of BPOs they have ordered and reviewed.    The highest and best price is the only offer they are interested in.  You want to be that offer.  No?  Yes, you do.  

The terms of the contract is where you are going to make your money.     With the bank focused on the price they leave open the terms of the contract for you to get your advantage.  A short escrow period or longer escrow,  escrow fees paid,  loan finance points paid and city or county transfer taxes are a few of the areas to negotiate your way to a great buy.  The question of repairs is asked often….Yes, banks make repairs on REOs!  I know you have heard different.   Clearly stated and evidenced, necessary, cost of repairs can be negotiated after your offer is accepted.   I have experienced this with buyer clients before.  Investors know this very well!  The bank does not MAKE the repairs…They reduce the price in accordance to the evidence and qualified estimates your agent must provide.   San Jose has many single family homes and condos, for sale, that you and your agent should be considering using these tools. 

What frustrations have you had trying to buy one of these homes?

Are you a homeowner planning on moving up to a bigger or more expensive home? Here’s a guide for planning the transition in today’s foreclosure heavy market.

Figure out how much your current home is likely to sell for.
Have your real estate professional conduct a comparative market analysis. “Be realistic about pricing the home so it moves quickly,” adds Sandy Guralnik, a broker with Coldwell Banker United in Charlotte, N.C. This will help you avoid a long gap between when you buy your new home and sell your old one.

Consider the market.
If you have only been in the home two or three years and made little or no down payment, you might not have enough equity to sell at a profit in today’s soft market. You might even owe more on the mortgage than the home is worth.  This is far to common in the current foreclosure heavy market.  On the other hand, if your home has appreciated well, it might be easier to move up to a bigger and better home than ever before!  Especially in Cambrian Park, Santa Clara and most of San Jose.  Cupertino has consistantly bucked the market recently.

Consider your finances.
Your overall debt picture is important if you plan to move into a larger, more expensive home. In addition to a higher mortgage, you’ll likely have higher utility, insurance and property taxes as well. If you owe money on a home equity loan, you’ll have to pay that back when you sell the home, which will eat into your profit.

Get preapproved by a reputable lender.
The lender will tell you how much money they’re willing to lend you, which will tell you how much house you can afford. Then, figure out how much you’re comfortable spending. The two numbers are not necessarily the same, says Jan Miyasato, director of corporate and client services for Prudential California Realty in Pleasanton, Calif.

Determine your long-term housing needs.
Will you be starting or expanding your family in a few years? Will the larger home be as teen-friendly as it is toddler-friendly? Is there a place for a home office if one of you eventually works from home?  With the many economy issues this should play a large part in your decision process.

Be realistic.
Most people will not be able to move up from a starter home into their dream home. It’s a long-term process that occurs over several moves, says Debbie Wong, a certified residential specialist with Prudential California Realty in San Mateo, Calif. Plus, it’s harder to qualify for a loan if the jump in monthly payments is too big, she says. Not to speak of all the hoops many lenders are expecting you to jump through now.

Preview properties in your target price range and location.
Most importantly does that “Super Foreclosure Deal” really translate into a home. Look to see whether the homes match your trade-up goals.

Get your home on the market.
Moving up will go more smoothly if you are able to sell your home before trying to buy another. For one thing, many Sellers are leery of contracts in which the sale is contingent on the Buyer selling their current home. Foreclosures are held by Banks that are not willing to diminish there pool of potential buyers.  If they accept your offer they will be required to place the home on a pending status and other buyers will be considering it. Finances also are an issue.   Bridge loans to carry you from your current home to the next are almost impossible to get today.

Determine the best time for your move.
If you want to move in the summertime, start your other preparations early enough to meet that goal.

Just thought I would share a link where San Jose, CA.  and Austin, TX. appear to be tied as great investment locations.   San Jose made it because the prices have fallen by a median of $250K last year.

 BUY NOW…never was so true.

 http://www.bizjournals.com/austin/stories/2009/01/26/daily16.html?ana=from_rss