Pay Off Debt Consolidation

One of the most controversial and paradoxical real estate and mortgage finance stories to hit the media in recent weeks was that of a newly crafted real estate tax bill – the so-called Mortgage Forgiveness
Bill of 2007. The bill, which may help you hold onto your money if you face foreclosure but will likely hit you hard in the wallet if you own a second home, was drafted by Democrats and approved by the powerful House Ways and Means Committee. Rising Foreclosures Led to the Drafting of the Bill- During the past two years, a number of economic factors have conspired to create a perfect storm of problems for many homeowners. First of all, prices of residential real estate fell precipitously. Then, as interest rates rose, the monthly payments for many adjustable rate mortgages jumped. Next the mortgage industry hemorrhaged, thanks to the volume of bad loans and delinquencies, and this trouble spilled over into other areas of the financial industry. In an attempt to control losses and appease government regulators and investigators, mortgage lenders tightened their guidelines for approving loans – after a long period of lax standards and “easy money”.

Just as homeowners realized the imminent danger of rising adjustable rates and rushed to refinance into more affordable conventional fixed-rate loans, the ability to refinance got harder as loan applications became much more stringent. As the challenges for homeowners increased, so did the number of foreclosures. Lenders May Show Leniency, but the IRS Does Not- Sometimes banks and mortgage companies will forgive a portion of the debt owned to them, in order to process delinquent loans in the most cost effective manner. Lenders typically lose about 50 percent of their investment when a property goes to foreclosure. So forgiving debt can actually save them money in the long run, by encouraging third-party investors to step in and buy the house before it goes to foreclosure and fetches less money on the auction block. And many government officials – including the President – have asked that lenders show flexibility to homeowners faced with foreclosure, so there is an added incentive for banks and mortgage companies to work out arrangements that are mutually beneficial for lenders and borrowers.

Now the government has recognized that most people are in bad shape if they lose their homes. As a result, they’ve come up with a bit of legislation that helps people avoid the income tax consequences of mortgage debt forgiveness for the years 2007 through 2012. The legislation is known as the Mortgage Forgiveness Debt Relief Act of 2007.

The process works fairly simply. You can avoid paying income tax on up to one million dollars in mortgage debt forgiven as a single individual or two million as a married couple. The debt must be applicable to your primary home. It applies to the money used to buy or build the home. It also applies to any refinance debt that was used to improve the home. Refinance money that was used for other purposes is not covered.

To claim the exemption, you need to fill out Form 982. You should also receive a 1099-C from the lender in question. Make sure you check it closely to affirm that the numbers reported are correct.

Learn more about Obama Mortgage Relief Plan Qualifications.

California state income tax on forgiven debt resulting from a short sale, foreclosure, or loan modification will no longer be imposed on homeowners in California. Senate Bill 401 makes California’s tax treatment of mortgage forgiveness debt relief income the same as federal law. Be advised, however, that only the debt stemming from the loan secured by a “qualified principal residence,” will be exempt from both federal and state income tax consequences.

While the federal exemption amount is up to $2 million, the California exemption is up to $800,000 and forgiven debt up to $500,000. Now, I know you’re thinking… what is a “Qualified principal residence.” This means that only the debt incurred in connection with acquiring, constructing, or substantially improving a principal residence is the subject of this legislation.

This helps people to have a mortgage that is more fair and manageable. Homeowners can qualify for up to a 30% reduction of their mortgage principal. This amount is set aside by the bank and after 5 years of on time payments the amount is forgiven. This gives homeowners a second chance to save their credit and keep their home.

These “tax breaks” are applicable to debts that are discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment. Taxpayers who do not qualify for the exemptions (for example, those homeowners with second or third homes and/or rental property or properties) may potentially also claim an exemption, through other provisions in the law, however.

Generally the loan approval period can be lengthily depending on the complexity of your situation. But is your loan was insured or your loan is government backed you automatically qualify for modification.

Learn more about Obama Mortgage Relief Plan Qualifications.

The general consensus among real estate professionals is that buyer activity has substantially picked up within the last 30 days. This activity is mostly in lower price ranges and among distressed properties, overall activity is up.

Across the four county region Bank Owned properties are jumping off the market at record paces. Multiple offers and high percentages of all cash offers are common place. The market for higher priced properties does remains sluggish by comparison, bargain prices for REO’s and low priced short sales (under $200,000) are clearly the value proposition that many homebuyers and investors are focused on.

The average price of these Foreclosure properties ($164,000) came in 22% below last year and 2% below last month while the number of properties available for sale has remained at an unusually low level of 1.6 months inventory. There were 60% more new Foreclosure property contracts accepted or pending sale than in the same month in 2010. This compares to a 35% increase in pending sales and a nearly 7 month inventory of homes over $400,000.

Another notable factor in this market is that the number of Short Sales going under pending status jumped for the fourth straight month, up 14% from last month and 116% over last year. The average price of these Short Sales is down 2% from both last month and last year. This increase in Short Sales suggest that lenders are getting more motivated to complete a short sale transaction. This allows the lender to keep another foreclosure out of the market a positive for the market as a whole.

While the higher priced properties are not as active as the Foreclosure and Short Sale category. there is improvement over this same time last year. The average price for homes over $400,000 was steady at $574,000 compared to last month and last year; and new contracts are up 35% over last year.

Market Sales Data for Sacramento,Placer,El Dorado,Yolo Counties

For all sales within the month of June 2011 we had 2,376 closed sales, pending sales were at 3,597 and inventory came in at 7,342 units. We have 3.1 months of inventory currently on the market and the average sales price is $222,000. The average price per square foot was $121.

For short sale properties for the month of June 2011 we had 590 closed sales up from the prior month with 538 sold units, this is a 10% increase. We had 1,405 pending sales reported in June a 14% increase from the month of May. The months of inventory has decreased from 4.7 in May to 3.9 months in June, a -16% decrease. The average price per square foot continues to drop from $115 in May to $113 in June, a -2% decrease.

For Bank Owned homes nearly every catagory has seen a decrease from May to June. We have also seen an overall decrease in the last year from June 2010 to June 2011 of -22% in average sales price and a decrease of -15% in price per square foot.

For the last two months foreclosure properties have dominated the total market sales in both closed transactions and new contracts with 37.7% this month and 39.6% last month. Short sales came in at 24.8% of closed sales for this month and 23.2% for the prior month.

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There are a few different ways to go about purchasing a home. Generally, homeowners have to take out a home mortgage to buy a home, and that mortgage has to be repaid in monthly or regular payments. If the homeowner ends up not being able to repay the mortgage with those payments, the home can be seized.

In 2007 the real estate market suffered a huge crash. This resulted in many homeowners being unable to keep up with their mortgage payments. This in turn causes foreclosures.

So why were so many people defaulting on their payments? Why were mortgage payments not being reached? A main reason was that the borrowers of real estate had slim chances of repaying the established mortgage amount with out refinancing the home with a lower interest rate.

Since the real estate market was in an up market before the crash, homeowners ran in to trouble keeping up with paying the mortgage bill. They couldn’t just sell the home and purchase a more modest one. That was no longer an option, since there was no profit to be gained in selling a home in a down market.

As home prices decreased, interest rates increased. It increased so much that foreclosures continued to happen at a high pace. Homeowners were kicked out of their home, and then the institution that lent the money in the mortgage would auction the home themselves. The home would still go at the lower price, however. The large amount of foreclosures caused the government to step in.

This is where short sales come in to play. A short sale is when someone sells a home at a price that is much lower than what the homeowner originally bought the home for. The original homeowner’s pending mortgage payment was much higher than what the selling price was going for, but the lenders accepted the initial price to avoid expensive foreclosures and long repayment options.

Short sales are thought of as a better option for homeowners because there are less negative aspects involved with a short sale. Short sales still have consequences, but not nearly as bad as foreclosures do.

For example, after a foreclosure if a homeowner wants to get a new mortgage loan they need to wait nearly five years typically before they can qualify. Short sales, however, usually take around two years. Also, because of the Making Home Affordable (MHA) Program, short sale owners get an allowance of $1,500 for relocation expenses, and are usually exempted from any taxes on the forgiven amount of the real estate sale.

Todd McCauley is an owner/agent of Eagle Rock Properties, specializing with homes in Boise Idaho. He manages a program called The HELP Program that designed to help struggling buyers qualify for a mortgage. He helps buyers and sellers with Boise homes.

If you are faced with financial problems regarding your home loan, you have to look for the best way to avoid foreclosure. Although governments say that the recession is over, the ill effects of past financial problems are still there. Some of these problems are unemployment and foreclosures.

The long term effects of the recession in recent years are unemployment, ruined credit scores, defaulting on loan payments and foreclosure of properties. If you are about to lose the house you and your family live in or an investment on a commercial property that cost your life savings, you can still find ways to save it from foreclosure.

One way to prevent losing your assets is by asking someone to take over your loan payments. Maybe a wealthy family member or friend can help you. You can also try to sell your property but this may take too long. While you search for a buyer, your bank may also be in the process of foreclosing your assets.

As you search for someone to assume your loan payments, you can try to have your property rented out. You can try to talk to your lender to postpone the foreclosure by explaining your situation. Tell your lender that you are trying to find a tenant, buyer, or someone to take over payments.

If your lender decides to cooperate, you can revise your payment plan and attach an amendment to your contract. Maybe your lender can lengthen your payment scheme. As soon as your bank agrees, look for someone to rent your home or property immediately. Maybe a relative or a friend can take over payments while you are looking for someone to rent the place.

Another option is to modify your loan. This is like refinancing your loan but not quite like it. Explain to your banker or lender why you were not able to cope with monthly payments. Maybe you had been sick or lost a job. They might consider revising your mortgage if your reasons are justified. Work for lower monthly payments or extending the payment terms. It is important that the mortgage plan is revised to something you can afford to pay.

A short sale is also one of the best solutions to preventing a foreclosure. In this situation, your property can be sold quickly by offering it at a price lower than its value. Sometimes it is difficult to find a buyer because of the price. By lowering it, you can quickly get to sell it. It is a good way to cut your losses for both parties. Banks end up spending a lot of money to process a foreclosure.

Even if your bank will settle for a price lower than the value of the property, they will still save money by avoiding foreclosure proceedings. On your end, you get to save your credit history and maintain a good score. Foreclosures will definitely make your credit score go down and you will not be able to make another loan any time soon.

Looking for more information on foreclosures and repossessions? You can find detail about the best way to avoid foreclosure now in our super guide to advantages and disadvantages of foreclosure on http://www.ebenezerrealestate.com. This article, Helpful Methods On The Best Way To Avoid Foreclosure is released under a creative commons attribution license.

It is easy to feel discouraged when you deal with short sales. I’ve been there before myself. There are a few phases that come along with the “short sale blues”.

Phase 1: Carrying On: The first phase of short sale is when you start having financial difficulty. This usually is not one huge financial crisis, but a series of them. You keep telling yourself “I can still get by. It will be rough, but I can do it.” If you get out of this phase consider yourself lucky since many people are unable to.

Phase 2. Uh-Oh! $%^!@#* If things don’t work out quickly-either through picking up a great new job, getting a family member gift or some other miracle-the next phase is the !@#$% phase. The good news is this is the worst part. Once you make it past this, things only get better. You-along with thousands of others before you-will find yourself saying, “But I’ve never missed a payment in my life. I’ve got an 800 credit score.” You spend a lot of time imagining the police hauling you off to jail and debt collectors kidnapping your pets for ransom. All hyperbole aside, this phase of short sale blues is likely to be one of the worst time of your life. It true feels like life is over.

Phase 3. Resigned Resolve. If all goes well, you’ll spend as little time as possible in phase 2 and move quickly to “resigned resolve.” After talking to friends and perhaps speaking with a lawyer, you decide to put the home up for sale. Many borrowers quit making house payments at this point and for those who do, there are a few months of respite from the horrific financial pressure you’ve been feeling. You live with the hassle of people tromping through your home and slowly come to grips with the thought of leaving your home.

Phase 4: Waiting on the Bank – Short sales can happen quickly or can happen slowly. Thankfully for Boise real estate, Boise home sales are up by 37% from the month of February to the month of March. With the market around 20% of all real estate sales are short sales. There are a lot of willing buyers looking for a good home. Eventually your home will get an offer on it. However, even with a willing buyer you still need to wait to get approval from your bank. This can be a long and painful process. One of my worst experiences was when it took the bank eleven months and three buyers before the sale was approved. During my time as a Boise real estate agent I have noted that over half of my initial short sale buyers give up and walk away in frustration because they are tired of waiting for the bank to approve the sale. Most of the short sales conclude with a second or third buyer, simply because the process takes so long.

Phase 5: Close the Deal – Finally, the day has arrived where your short sale finally closes. This is not necessarily a happy occasion, but it is one that offers relief from the constant headache selling your home offers. This is a good time to let go of the hardships and move on with life. Be sure to speak with your accountant about whether or not you will receive a 1099 tax form because of the income you got from your home sale.

Short sale blues are hard to navigate through. However, there is light at the end of the tunnel. Talk to others that are in similar circumstances to you. Find others that have gone through short sales and lived through it. They can be an excellent source of advice for your future years while you wait for the consequences of a short sale to lessen.

Todd McCauley is an owner/agent of Eagle Rock Properties, a Boise real estate firm. He helps struggling buyers and sellers with their Boise homes.

. Purchasing a house in foreclosure can be a complicated process, and to make riches investing in foreclosed homes, you must know the process completely. Jumping into this form of investing without a continuous foundation can be very risky.

As you start to learn about the foreclosure process, you must to take a look at your community and state laws that direct the buying and selling of foreclosed houses. Depending on the state in which you live, there may be limitation on how long you you are required to physically live in the home as part of the sale. Depending on your investment goals, these laws may place considerable barriers to your investment goals.

If the laws will allow and you feel you could profit from fixing and flipping foreclosures, the next step is basically to locate a residence that is in foreclosure. Your regional county posts a list every day, and if you don’t want to go down to the recorder’s office, there are a number of online services that do provide a daily list of public sale foreclosures. Tap into as many of these tools as possible in order to stay informed on what properties may be coming up for auction that meet your investment profile.

As part of the process of investing in foreclosure, you need to establish the financing for the investment. Buying a foreclosed home from a court auction requires a sizable down payment, or more often, the full cash sum on purchase. As a result, you must have your financing in place before you buy the home.

Finally, if you have your financing in place, and have found a house that will meet your investment goals, the next steps are just to bid and subsequently buy the foreclosed home. During the buying process be sure not to overbid for the home; at auction you may be competing with additional investors and it is very easy to bid yourself right out of your income.

Once you have closed on the house and it is yours to keep and administer or rehab and repair, it is just a matter of getting to work. In conclusion, buying a foreclosed home is an easy process; you just need to know what you are doing.

For many individuals, finding a mi foreclosure can be a challenge. Visit us today to learn how to buy foreclosed homes and being generating a return in real estate.

In today’s market, those investors who may successfully buy short sale homes stand to make a lot of capital. Investors familiar with short sales know the benefit of being able to buy a property at fire sale prices. If you are new to purchasing short sales of pre-foreclosures, please appreciate that while the process may seem complex, the return on investment be able to be fantastic.

With this in mind, how does one go about buying a short sale property? Initially, to define a short sale in real estate, it is just buying a property for less than is owed. For an investor the obvious benefit of this type of investment property is obvious. Please keep in mind however, that the upside for the bank is low so there are a number of requirements that need to be met in order to complete a short sale. Because of this fact, there may be many requirements and restrictions that the lender will require as part of the process

The nearly all apparent participant in the short sale process is the owner of the property who is willing to walk away from the property for less than is payable on the loan. There are a number of motivations for a property owner to be in this position, but before performing any due diligence in buying a short sale, you must be sure that the owner of your target property is motivated.

If you have a willing property owner, get to also know the loss mitigation department of the mortgaging bank. As a financial institution, a lender will only agree to let an investment or mortgage go if the cost of owning it is going to be greater than the payoff. For most institutions, they will only agree to a short sale if the property is at risk of foreclosure. Given this fact, if you plan to buy a short sale, you must demonstrate to the lender that letting the short sale proceed will be less costly than not proceeding.

Now that you appreciate the motivations of the two players, purchasing a short sale is only a matter of satisfying their two unique needs. To create a short sale package that you will use to plead your case to the bank, work with the owner to craft a letter and substantiation that shows an incapacity to continue to pay the mortgage. Locate any and all areas of disrepair on the property and take pictures of them, and get an appraiser to come out and give an appraisal based upon the lowest marketable value of the home.

Combine all of these documents together as well as any additional documents required by the loss mitigation officer of the bank to create your short sale package. Submit your purchase proposal along with the short sale package to the institution and gently push it through the approval process. It the request is approved, your purchase of the short sale goes through. If not, only modify your proposal and submit it again.

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