Category Archive : Short Sales

Las Vegas Short Sale News: Senate Extends Mortgage Debt Forgiveness Act for 2014

Homeowners who sold their home as a short sale and their REALTORS® sighed in relief today as the U.S. Senate followed the U.S. House of Representatives meaning Congress finally approved an extension to the Mortgage Debt Forgiveness Act of 2007. This act has exempted sellers who sold their primary residences on a short sale to avoid being taxed on forgiven debt.

The Debt Forgiveness Act had expired at the end of 2013 leaving those residents in Las Vegas and nationally, who were planning on completing a short sale in 2014, in a position to potentially be taxed on large amounts of debt that could be treated as income.

The extension bill approved today retroactively includes eligible short sales that closed at any time during 2014. The caveat is that the bill approves short sales that closed during 2014 only. A new extension, which seems very likely to be approved, will be left to the incoming 2015 Congress. The reason another extension is likely is that Washington will want to have a new extension that allows for a reasonable and noticed end date, and not simply cutting off homeowners past 2014. A lot of potential Las Vegas sellers have been on the fence about whether to list their homes this past year because the extension was not in place. The down side to that inaction is that another year then passes and the seller never moves forward to address their debt and financial recovery.

Las Vegas Sellers who sold their home in 2014 should obtain professional tax advice to see if they qualify to get the debt exemption. I recommend either a CPA or enrolled agent level tax professional on this issue. The cost is far less expensive than you think and making sure that tens of thousands of dollars of debt are not counted against you, demands you get properly advised.

Any homeowners who, despite the recent run up in prices and are tired of being underwater, can call Paul Rowe at Shelter Realty for a no obligation review of their situation. You may reach Paul at 702 376 7379 or email him at info @ shelterrealty dot com.

Beginning August 16 2014. those who want to utilize a “conventional loan” to purchase a new home after previously selling a home on a short sale will face a longer eligibility period.  At present, buyers who sold their previous home as a short sale can purchase again after two years if they are putting down 20%. After August 16 the waiting period moves to four years when using conventional financing.

Fortunately, buyers can still purchase with FHA financing after 3 years.  This is the current guideline for FHA and no changes on the three years appear forthcoming.

Buyers who are looking to purchase quicker than three years after a short sale may have some options open to them utilizing credit repair companies but be careful who you use and try to only work with a company who has a track record. They must show you a successful track record and if they aren’t successful, offers you some reimbursement in the event they can’t deliver.

For more answers regarding short sales including your particular situation please contact Shelter Realty Inc., at 702-376- 7379 or by emailing info @ shelterrealty. com

There has been a lot of public discussion whether the new Homeowners Bill of Rights (Nevada Law SB 321) will open up short sale transactions that are not considered “arms-length transactions”. The term “arm’s length” means that a sale does not occur between principals who are close relatives, those with existing business relationships, straw-buyers etc. The theory is that the buyer and seller do not have other incentives influencing the transaction. An example would be sellers in a Las Vegas short sale selling to their parents in order to buy the home at a later time. Under this scenario, the parents would be incentive to get the lowest price for the children to buy back later. It is easy to see how a bank taking a loss on the mortgage would see that as not in the bank’s best interest.

The banks who hold the mortgages on upside down properties generally have the principals in a sale (buyer and seller) sign agreements stipulating the sale is an arm’s length transaction between essentially unrelated parties. Once these agreements are signed, the principals are bound by the terms and subject to breaking federal bank fraud laws if they are found to have violated the terms of the arm’s length transaction agreement. One of the most eagerly monitored items was the expectation that SB 321 was going to prohibit banks from imposing arm’s length transactions in Nevada. The following statute in the bill addresses this issue:

Sec. 16.5.

1. No provision of the laws of this State may be construed to require a sale in lieu of a foreclosure sale to be an arm’s length transaction or to prohibit a sale in lieu of a foreclosure sale that is not an arm’s length transaction.

What is missing is there is no language barring arm’s length transactions. I am not an attorney and I am not offering a legal opinion. This is simply my opinion as a real estate professional after consulting with attorneys as well as reading the bill myself. It appears the State is communicating legislative intent that a “sale in lieu of foreclosure” (short sale) that is not an arm’s length transaction is essentially welcome.

This falls considerably short saying banks cannot require the “arm’s length agreements” in Nevada.

There have been plenty of local attorneys and real estate agents putting out a narrative that under SB 321 banks cannot require an arm’s length transaction agreement to be signed. While not really true,  this tactic gets their phones ringing from potential clients, and that is always the goal when trying to get new business.

My consultation with attorneys indicated that the State of Nevada does not prohibit short sales which are not arm’s length transaction. The bottom line is that nothing has changed; signing an arm’s length transaction agreement while trying to do a short sale remains voluntary between all parties. The seller isn’t required to sign and the bank doesn’t have to require one, though they usually do. If the bank agrees to the sale without a signed “arm’s length”, and a seller has provided honest personal and financial documentation, there is nothing illegal about doing a short sale that is not an arm’s length transaction.

Here is the rub, if you want to attempt to do a Las Vegas short sale that is not an arm’s length transaction you’ll have to be up front about what you want to do and try to get your short sale approved without ever signing an arm’s length transaction agreement.  If I have a seller inquiring about what their options are, they should consult an attorney and if they need an attorney recommendation, I can recommend attorneys I have worked with in the past they can consult for free.

Disclaimer: This article is not meant to construed as legal advice and all sellers considering a short sale should consult with an attorney and seek professional tax advice as well.

Las Vegas, NV – February 5, 2013 – Shelter Realty

Shelter Realty’s top producing short sale listing agent recently added the CDPE (Certified Distressed Property Expert) designation to his license after completing their intense two day course on January 29^th, 2013. The Charfen Institute which created the CDPE course has established itself as the preeminent training program for short sales.

The need for qualified short sale agents in the Las Vegas real estate market has dramatically increased after the market crashed in 2008 and sellers needed a viable alternative to foreclosure.

When asked why Paul took the course despite having already closed nearly one hundred short sales already, he replied: “It is important for sellers to know who is a true expert and who is not. I had the experience and plenty of short sale closings, but it is also important for future clients to see that I have completed formal training as well.” The CDPE designation is something the public recognizes and helps them during their evaluation period when deciding if an agent has the skills necessary to guide them through very difficult circumstances.

Paul also belongs to other short sale groups such as Short Sale Genius, Short Sale Superstars. “Constant training is necessary to serve my clients, he said. Nobody has all the answers, especially in a rapidly changing field like short sales. The way we do short sales is dramatically different from just a few years back. I belong to work groups with agents and other real estate professionals from across the country which provide valuable support should a short sale transaction begin to encounter serious difficulties.”

You can reach Paul Rowe by calling Shelter Realty at (702) 376-7379 or by emailing info @ ShelterRealty.com or by filling out a contact form on the Shelter Realty website.

Las Vegas Short Sales: Bank of America Issues Changes to Short Sale Programs

Bank of America came out with a few changes to their short sale programs today. The first change mostly affects flippers. Short sales closed through Bank of America now have deed restrictions upon re-selling the property. The home cannot be resold within 30 days (aimed directly at double-closings). Furthermore, the home can only be resold for 120% of the short sale price within 90 days after the short sale closes. Many flippers use high interest, liquid funds and often want to sell the home quickly to avoid high holding costs.  This will not in all likelihood stamp out flipping but the trend is clearly designed to hamper it. The banks are upset that money is being left on the table that they did not recover on the original short sale.

The other set of changes relate to seller incentives for relocation expenses from Freddie Mac and Fannie Mae if they are the institution which holds the note that Bank of America may be servicing on behalf of your mortgage. Fannie and Freddie may pay up to $3,000 on short sales except in the following cases:

1. The borrower is required to contribute funds or execute a promissory note.
2. The borrower has Permanent Change of Station (PCS) orders and receives a Dislocation Allowance (DLA) or other government relocation assistance.
3. The servicer has knowledge that the borrower is receiving relocation assistance from another source other than the servicer.

It should be noted that if the seller is receiving incentives from another source for the short sale and it exceeds $3,000 and this is a Freddie Mac or Fannie Mae loan, then no incentive will be paid in addition to the alternative incentive payment.

There are now multiple incentive programs related to Bank of America serviced loans; some in excess of $30,000. If you know that some point your upside down mortgage is unsustainable then it is important to check out all your options that may provide a graceful exit from the situation and maybe even get some money on the way out as well.

You may call Shelter Realty for a personal assessment to explore if a short sale is a good option you. Call 702-376-7379 or complete our contact form.

Bank of America today is offering anywhere from $5,000 to $30,000 for “enhanced relocation assistance” to homeowners that qualify. I will get into some of the details in a moment. Bank of America told us in the email, that homeowners should contact a real estate agent familiar with their programs. Some homeowners may already have been notified by mail. Since too many home owners stop looking at their correspondences from their mortgage banks, the banks have turned to real estate professionals to make contact with these borrowers who may not be aware of the opportunities and financial incentives available to them.

Some of the details include:

• Borrowers must have their real estate agent initiate a short sale with Bank of America prior to the end of this year and the sale must close prior to Sept 26, 2013. If you already have a short sale working you are not eligible for this particular program, though other incentives such as HAFA short sales and Bank of America Cooperative short sale programs may still be available.
• Investors as well as owner-occupants are both eligible
• The amount you are eligible for is usually determined once the bank has performed their own valuation of the home by sending out an appraiser or real estate agent to perform a sales valuation known as a BPO (Broker’s Price Opinion).
• Incentive may be used as relocation expenses for the borrower or to pay towards junior liens. This can be very useful if you have a 2^nd lien which could interfere in a short sale
• The homeowner must participate in one of the Preapproved Price Short Sale Programs, such as:

HAFA (Home Affordable Foreclosure Alternatives), Bank of America’s Cooperative Short Sale Program; specific investor participation and eligibility criteria do apply to these programs.

• Cannot “double-dip”. If you are receiving an incentive from another program, that amount would be deducted from the enhanced relocation incentive program. Example: you are receiving $3,000 HAFA incentive and were eligible for $20,000 from enhanced relocation program; you would only receive $17,000 at closing.

In addition to this potential benefit, closing a short sale in 2012 also other incentives a homeowner should be aware.  May homeowners of their primary residences can be exempted from up to $500,000 of loss that would normally be taxable thanks to the Mortgage Debt Forgiveness Act of 2007 signed by President Bush. This Act expires December 31, 2012, so it is important to get going right away.

Please contact me here at Shelter Realty by calling 702-376-7379 or emailing info @ shelterrealty.com.

The green light may turn red at on December 31st 2012 for sellers of their personal residences who may want to do a short sale in Las Vegas. The Mortgage Debt Forgiveness Act of 2007 expires on December 31st of this year. This Act allowed for sellers who were foreclosed, sold via a short sale or completed a Deed-in-Lieu of foreclosure to be exempted from any tax liability related to their mortgage debt on their principle residences as long as a few basic conditions were met. Debt used to either purchase the home or used for improvements (must be documented) to the property was eligible for exemption.

When a home is sold at a loss to the bank, a gain is realized by the owner. How could this be when the home plummeted in value many would wonder but it works like this: The bank loaned a homeowner $350,000 to purchase a home. They only got back $175,000 after a short sale. The bank lost $175k. The homeowner gave them back $175,000 less than they borrowed. That portion is considered a gain and could be taxed at the owner’s normal income tax rate…ouch! The Mortgage Debt Forgiveness Act addressed the insanity of punishing devastated homeowners even further than merely losing the home by also taxing them.

Unfortunately, this benefit is now coming to an end. Given the fact that a Las Vegas short sale frequently takes 4-6 months to complete when you factor in the extra time a buyer needs to close on a home, homeowners that want the certainty of knowing they can still take advantage of the Mortgage Debt Forgiveness Act of 2007 need to take action. There is a clear mandate for sellers to sell their home in 2012, but not beyond. Any rumors of an extension to the Act are just that right now…rumors.

This article is not meant to be used as tax advice and is only a discussion of the general principles related to the Mortgage Debt Forgiveness Act of 2007. Only a tax professional can and should be consulted to know the impact of a short sale based on your personal circumstances.

Paul Rowe manages the short sale division at Shelter Realty. If you would like to speak to him directly, please call Shelter Realty at 702-376-7379 or email him at info @ shelterrealty.com.

Chase Bank is paying up to $30,000 as an incentive for borrowers to do a short sale. This program has not been well promoted by Chase. In fact, the only way to know if you qualify is to call their Customer Service Department.

I called Chase directly for details and I was told that borrowers would have been notified by letter. From what I can gather, you can’t apply for this incentive. Either, your loan is included or it isn’t. It seems the prime candidates are persons whose mortgage loan was originally a Washington Mutual Loan (WAMU).

It is also important to note that $30,000 is the maximum they will pay and your incentive, if offered, may be lower depending on geographic area and the loss the bank is incurring by accepting the short sale.

Paul Rowe is the managing agent for the short sale division at Shelter Realty. Contact him directly for any short sale questions by emailing: info(at)shelterrealty.com or by calling 702-376-7379.

Once a property is sold at foreclosure or when the property is sold as a short sale, there will be a remaining deficit of what is owed to the lenders who are holding any mortgage debt. While state laws may affect what constitutes as deficiency, usually it will be the difference between the original loan amount plus any past due interest, less fair market value of the home. Most often the sale price will be accepted as fair market value.

Example: A home with a $360,000 mortgage balance is sold on a short sale for $230,000.  This creates a roughly a $130,000 deficiency amount.

If the state the property is located such as my State, Nevada, the loan is likely a recourse loan and the bank experiencing the deficiency has the right to pursue that borrower after the property is sold. Banks in Nevada have 6 months to file suit for a deficiency judgment after foreclosure or in the case of a short sale in which the deficiency rights have been retained. For loans generated after Oct 1 2009, banks will not have the ability to pursue a deficiency, if the home was purchased and occupied as a personal residence. Don’t despair homeowners, in many cases, a good REALTOR® can frequently get that deficiency waived for you, even if state law does not automatically protect you.

Getting a deficiency judgment is not a simple matter for the banks. They actually have to take you to court and win a lawsuit against you. This must also be accomplished within a very limited time frame. Remember all of those hastily written mortgages that were bought and sold over and over during the real estate boom?

Paul Rowe lists and sells shorts sales for Shelter Realty. He can be reached at 702-376-7379. You may also email him at paul @ shelterrealty.com.

You’ve come to the realization that you owe more on your Las Vegas house than it’s worth, so now what? You don’t want to foreclose (when the bank repossesses your home) but you want to get out of your house and mortgage. Short sales can be a viable option for you – but if you are unsure of the process, then it’s time we had a talk.

Working with a true short sale specialist (like Paul Rowe, the managing agent for the short sale division at Shelter Realty) is the one of the best ways to boost your chances of a successful short sale.  In fact, a real estate agent with proven experience with Las Vegas short sales can mean the difference between a successful short sale and a foreclosure (which is typically a far worse black mark on your credit than a short sale is).

When you find a short sale agent, you should have an open and honest conversation about what to expect. Will the short sale take one month, three months, nine months? You should ask as many questions as possible, because after all, you are the one who is drowning in your house.

As you consider whether to short sale your Las Vegas home, keep these three points in mind:

• With the right short sale expert, your Las Vegas short sale doesn’t have to be painful.  (We can’t guarantee success, but we won’t make the process complicated).  A short sale is a complex transaction that demands a real estate agent with expertise and diligent follow up systems, and having personal relationships or internal connections with lending institutions are invaluable.  The right short sale agent will take care of those complexities; for the seller, the short sale process shouldn’t be difficult.

• Patience is required. Once you’ve made the decision and started the short sale process, then you just have to wait. It can take at least 30-60 days to get your short sale approved – which we know seems like a long time. Sometimes, though, the process can drag on much longer, when the mortgage holder drags its feet. Because no two shorts sales are the same, times vary.
  
  While you wait for the short sale approval, this is the time when the process can feel really daunting. It can be frustrating not knowing the status of your mortgage – and that’s compounded when you don’t have good communication with your agent. It’s another reason having a great short sale agent is important.

• A Las Vegas short sale specialist with proven success is invaluable. Why hire any agent when you could hire one who is in the top 5% of real estate listing agents in the nation with regards to short sale closings. A real estate agent who has been trained to know how to make the short sale as efficient as possible will make your life easier (some agents, like Paul, work exclusively with short sales and have perfected their process).

The Las Vegas real estate market, the economy, the banks, short sale rules, and laws governing short sales and foreclosures can change from week-to-week (or hour-by-hour), which is why it is important to work with real estate professionals who are experienced with short sales and who have the most up-to-date knowledge.

Let us get you out of your submerged house and onto dry land. To set an appointment with Shelter Realty’s Short Sale Genius, or simply to learn more about how our short sale process can be your lifesaver, call us today at (702) 376-7379 or visit www.shelterrealty.com.

Nevada Law AB373 Aimed at Homeowners Who Damage Homes Prior to Foreclosure/Short Sale

The Nevada Legislature has taken steps against homeowners who deliberately damage their home prior to vacating the property during the period when the property is in default by criminalizing such behavior. After October 1, 2011 it will be a misdemeanor according to AB373. Persons can be subject to arrest and subsequent prosecution.

Owners may think they are getting back at the banks by taking this action but all they really do is hurt others. The banks are doing just fine. Who is really affected are the neighbors who see their properties decline even further when the home sells for less than it should. The next homeowner, who had nothing to do with the situation, can be affected for years if the damage inflicted by the previous homeowner leads to unnecessary maintenance breakdowns. Also, insurance premiums and mortgage rates can  also rise as the risk to loan in our area increases.

For any questions related to foreclosure and short sales, please contact Shelter Realty at 702-376-7379. You may also email us at info @ shelterrealty.com.

Given that a large percentage of Las Vegas home sales (almost 22%) are short sales, I’d like to go over the Las Vegas short sale process.  In some ways, a short sale is a lot like a traditional sale – your real estate agent lists your home for sale, puts out the “For Sale” sign, markets it to his network, maybe even holds open houses.

But in many other important ways, a short sale is much different.  Those differences all center around the fact that the mortgage holder (bank) must approve the short sale (because, after all, you’re asking the bank to accept less than you owe as payoff on the mortgage).  Today, let’s focus on what is probably the most important set of documents you will provide your agent during the process: the short sale packet.

What is the short sale packet for?  The short sale packet is in essence your proof that a short sale is your only alternative to foreclosure.  That you either 1) cannot afford your mortgage payments and/or 2) have to move and can’t pay the difference between the sales price and what you owe.

What goes into the short sale packet?

• Hardship letter.  As I wrote in Don’t Sell Las Vegas Short Sales Short, you’ll have to document some hardship – some reason you have to sell now and can’t cover the difference between the sales price and what you owe.  For many of our clients, the hardship was a job relocation (they had to move) or some event that made payments unaffordable (an adjustable rate mortgage reset, a job loss, medical bills, divorce, death of a spouse or co-borrower, failed business, etc.).  Explain why a short sale is your only alternative to foreclosure.

• Financial worksheet.  If you’ve said in your hardship letter that you can no longer afford your mortgage payments, here’s where you prove it.  Or if you’ve said that you have to move for a new job and you can’t cover the difference between the mortgage balance and the sales price, here’s where you’ll prove that.  The financial worksheet will include much of the same information as a home loan application does – a full list of amounts and sources of income; a full list of expenditures (how much and where it goes); a full list of all of your assets (what you own and what it’s worth); and a full list of your liabilities (what you owe).  Be detailed – the bank is going to compare this information with what’s on your credit report, paystubs, bank statements, and tax returns.

• Tax returns.  Provide copies of the last two years of 1040 tax returns for all borrowers.  The bank will use this information to verify the income you’ve reported (or to confirm if you’ve claimed a significant reduction in income).

• Pay stubs.  One month’s worth of pay stubs from the employer(s) of all borrowers.  To verify your most current income.

• Bank statements.  Two months’ worth of bank statements (from your primary checking or savings account).  As with the tax returns and pay stubs, the bank will use these to verify the information you’ve reported on the financial statement.

Shelter Realty provides their clients with complete packets: If all of the above items are sounding like a big hassle, don’t worry. Our clients are provided easy to follow instructions and pre-formatted documents the banks prefer to see. A short sale packet can be compiled in less than an hour. Our clients are also offered direct consultation to ensure completeness and answer any lingering questions prior to sending back their packets.

After I give it to you, what do you do with it?  When we receive an offer from a buyer, we take that offer, along with the short sale packet you completed, and send it to the short sale department at the bank.  A decision from the bank can then take anywhere from 30 days (or, in some cases, less) to 90 days or more.

If you’re considering a Las Vegas short sale, get the help of a real estate professional with proven short sale success.  That’s Shelter Realty – give us a call today at 702-376-7379 or contact us here.