6 Tax Facts Home Sellers Should Know

A History in Interest Rates

How to Determine How Much You Should Spend On Your Mortgage

Everyone knows you go to the lender for a pre-approval to determine what you can spend on your new home; but, is that the best determination?  Sure it gives you a maximum to spend.  What it doesn’t tell you is what you, personally, can comfortably afford.

What you should do, in conjunction with the pre-approval from your lender, is draft a budget.  Figure out how much you have coming in each month, what you’re estimated expenses will be (i.e. food, utilities, insurance, car, etc.) and what you have leftover.  From that you should be able to determine what you can comfortably afford as a monthly mortgage payment.

Don’t forget to factor in a savings plan. Generally an amount of 5% of your mortgage payment is a good target. You need to save for those major repairs and maintenance issues that are part of owning real estate.   Roof repairs, furnace/AC replacement, plumbing issues – they are all bound to happen at some point.

So don’t just look at the maximum you are approved for look at what you can comfortably fit into your budget.

Bank of America Offers Relocation Assistance

Bank of America has finally realized that reducing their shadow inventory and avoiding foreclosures is the key to expediting the economic recovery.  They have streamlined their short sale process and are now offering homeowners up to $30,000 in relocation assistance to those who short sell their home.

To qualify a homeowner must begin the short sale process prior to the end of 2012 and the deal must close by September 26, 2013.  The money offered can be anywhere from $2500 to $30,000.  Something is better than nothing and nothing is what you get if you allow your home to go to foreclosure.

Top 10 Legal Mistakes Home Buyers Make

Short Sales Have Become the Popular Solution to Negative Equity

You bought your house during the housing boom and have a mortgage that has already ballooned or is scheduled to.  Your house is now worth 1/3 less than what you purchased it for so you are unable to refinance.  The job situation is reduced or threatened.  What are you going to do?

Do you continue to pour your hard earned dollars into an investment that is plummeting?  Or into an asset that you are likely to lose to foreclosure?  Or do you consider a short sale?

A short sale is really your best option if you are in this type of situation.  It involves working with your lender to get a reasonable price for you property and to get out from under it without a huge credit hit and possible deficiency judgments by your lenders.

As with any financial decision you should always consult a CPA or tax attorney before proceeding to see if it is the right decision for you.  Then contact a realtor who is seasoned in the short sale transaction process.

San Diego Short Sales

Why Should the Bank Approve Your Short Sale?

There are many reasons that a short sale is much better than a foreclosure for a bank.

• Banks make more money. They have figured out over the few years that they net more money when doing short sales. Those attorneys that help them foreclose are not cheap.
• Saves a lot of time. The foreclosure timeline is a lot longer than completing a short sale. This also saves a lot of money since time equals money.
• Less inventory for banks. Banks don't really want to own your home. If they did own your home, that means more cost to them to maintain like taxes, mello-roos, insurance and maintenance like HOA fees.
• Better for the economy. The less homes the banks own means the more homes people own which is much better for the whole economy and will provide more stabilization to the housing market.

Setting Financial Priorities

The economy remains sluggish at best and most people are still dealing with a reduction in income while the expenses remain the same or escalate.  Often times there is no longer enough money to meet all of the obligations (home, car, credit cards) and still put food on the table and keep the electricity on.  So how should you prioritize?

Obviously food and utilities are important to everyday living so they are non-negotiable.  You can cut back on these though.  Shop the sales, use coupons and look for budget friendly recipes.  You can also lower your utilities by reducing your use.  Switch to flourescent light bulbs.  Save up your laundry and don’t run small loads.

Most consumers are also making their car loans a priority.  If you work or are looking for work you need transportation.  A vehicle is especially important in an area like San Diego that is spread out.  If you stop paying the car loan they will repossess it and you will be out of luck.

Credit cards can go either way.  If you don’t pay them off you won’t be able to use them anymore and your credit will take a hit.  Your balance will go to collection and you’ll be hounded by those people.  So it’s a toss up on that. 

Finally, there is your home.  You need shelter; but do you need the shelter you are in?  Are you underwater with negative equity and likely to lose your home anyways?  If you stop making mortgage payment could you put that money towards paying off your creditors?  It may be a good time to short sale your home and downsize to something you can afford.

The Home Buying Process

Foreclosure is Not the Best Option

Everyone loses in a foreclosure.  The banks generally received more than 20% less on the sale of a foreclosed property than they would receive in a short sale. This is prompting many banks to provide incentives of up to $30k to distressed homeowners to complete a short sale.

The homeowner loses in a foreclosure because they are sometimes responsible for the difference between the auction price and the amount owing on the mortgage.  In a recourse state the lender will most likely pursue the homeowner for the difference.  In a non-recourse state the first position lien holder won’t pursue but the second mortgage holder may.  Regardless you may receive a 1099 for the amount of the difference.

So it may really be worthwhile to consider a short sale.

NOTICE:  The information provided is for general reference only and is not to be construed as tax or legal advice. Consult your income tax preparer and/or attorney for specific details regarding your individual situation.

Seller Expectations on a Short Sale

Are you wondering what is expected of you in short selling your home? Here is a list that will help a seller better their chances in having a quicker and successful short sale. Of course, there are no guarantees that the lender will approve your short sale even if you do all these things.

1. Please fax or email any new pay stubs or bank statements on ALL your accounts. This includes retirement and investment accounts. You will be signing a form which gives the lender permission to pull your credit so they can see all your accounts. They need to see the statements for verification purposes.

2. Keep the utilities on. Unless it is specified in your listing contract to not keep them on.

3. Keep the property clean and presentable. Maintain the landscaping, pool and spa.

4. When you receive any lender communication, please let your real estate agent know.

5. If you have HOA dues, keep paying if possible.

6. Start looking for another home and be ready to move-out in 30 days after short sale approval.

Any questions please let us know. San Diego Short Sales

Why Using Retirement Savings to Pay Your Mortgage is a Bad Idea

We are 5 years into this sluggish economy and while some things have improved there are many people still struggle.  Job growth has been sluggish and many people are either unemployed or underemployed.  The longer the situation is sustained the higher various debts, such as credit cards, can climb.  The ever increasing debt load can lead to feelings of helplessness and panic.  This can trigger people to contemplate pulling money from their retirement savings.

This really is not a good idea.  The penalties from withdrawing funds early are a 10 % tax along with other taxes and penalties.  You need to consider as well the future interest you are giving up.  It can be a costly endeavor.

The other thing to consider is do you really want to put your retirement savings into a home that may still lose value.  There is still a shadow inventory of foreclosures and short sales held by the banks.  This fact alone will slow the home price recovery.  So sinking money into a home that decreases in value is putting money into someone else’s pocket.

The better alternative is to short sale your home now before you get even further behind.  Then find someplace to live that you can afford and build back up your savings and credit.  Then you will be ready when the economy recovers.

San Diego Short Sales

Expedited Short Sales! Is It Possible?

The larger banks have finally streamlined the short sale process and as of June Freddie Mac and Fannie Mae have begun expediting their short sale transactions.  Time will tell if the steps they are taking will achieve results.

Federal policies now require Fannie and Freddie servicers to review and respond to short sale requests within 30 calendar days of receiving an offer and complete borrower package.  After that they must provide weekly updates and a final decision within 60 calendar days.

It remains to be seen whether the servicers will actually make these deadlines.  There are no penalties for missing the deadlines so it’s not clear what their incentive will be.  But it is a step in the right direction.

For more information, please visit San Diego Short Sales

You’ve Completed a Short Sale: It’s Time to Repair Your Credit

Once you’ve completed a short sale your focus should be on repairing your credit as quickly as possible.  Damaged credit affects your future finances and the sooner you can bring your credit score back up the better able you will be able to get financing at a decent interest rate.

As we all know, your credit score is important when purchasing a new car or a new home.  The higher your credit score the lower your interest rate will be.  You’ll probably be renting for a while but eventually you may decide to purchase a new home and you’ll be glad you repaired your credit.

You can deal directly with the three credit bureaus, Transunion, Equifax and Experian and ask them to remove errors one at a time.  This can be time consuming but cost effective.  The best bet is to sign up with a company that will provide access to all 3 bureaus.  Compare the companies available before choosing.

Alternatively, you can use a credit repair company.  Please do your homework when choosing a company to work with.  Check any company you are considering with the Better Business Bureau.  Also, google the company name to see if they have received bad reviews or any red flags show up.

Whichever method you choose be sure to start early.  Don’t wait until you need to replace your vehicle or want to purchase a home to start.

San Diego Short Sales

The Time to Short Sale is Now!

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation are due to expire on December 31, 2012.  The act allows taxpayers to exclude income from the discharge of debt on their principal residence whether as a short sale or foreclosure as well as the amount of any debt reduction due to mortgage restructuring.  Once the act expires homeowners who short sale or foreclose will be liable for the tax on the amount of debt forgiven.  The IRS considers the forgiven debt ‘taxable income’.

The expiration date is just around the corner and short sales can take anywhere from 3 to 9 months to close, so it is vital to get the process started now.

Another reason it is important to short sale now rather than later is the fact that as the banks start releasing REO (bank owned) properties into the market the supply of homes will increase and this may affect the prices offered as well as the number of offers received.  The better the price your home commands, the smaller the amount of the forgiven debt will be.

Lastly, if you are underwater in your home, sinking more money into it is not going to help you recover financially.  The best thing to do is get out from under it now, begin saving up money for your next home and rebuilding your credit.

Any questions or comments, please let me know. San Diego Short Sales


Looking for a home in San Diego?  Real Estate in San Diego

Housing Bust is OVER!!!

According to the Wall Street Journal…the housing market has turned—at last.

The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing.

Nearly seven years after the housing bubble burst, most indexes of house prices are bending up. “We finally saw some rising home prices,” S&P’s David Blitzer said a few weeks ago as he reported the first monthly increase in the slow-moving S&P/Case-Shiller house-price data after seven months of declines.

From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses. “Manufacturing had led growth and construction had lagged,” JPMorgan Chase economists said last week.”Now the roles are reversed: Manufacturing growth has slowed as private construction comes to life.”

Plenty could go wrong. The biggest threat is a large shadow inventory of unsold homes, homes which owners won’t put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders. They have been trickling onto the market, slowed in part by government efforts to delay foreclosures; a flood could reverse the recent rise in prices. Or the still-dysfunctional mortgage market could get worse. Or overly zealous regulators or a post-election change in government policy could unsettle mortgage lenders or home buyers.

But the housing bust is over.

Source: Wall Street Journal

Looking for a home?  San Diego Real Estate

Short Sale vs. Foreclosure

Why is it better to do a short sale versus a foreclosure? The main answer is money! Some banks are now giving homeowners up to $30,000 to short sale their home! To find out if your lender is participating in this  program, just give us a call or send us an email. The other reasons to do a short sale versus a foreclosure are:

• The amount of time that negatively affects your credit report is a lot less
• The reduction in credit score is a lot less
• You can buy another home much sooner
• Does not challenge most Security Clearances (Police officers, military, CIA, security)
• No bad effects on current and future employment
• No deficiency judgment no matter what your circumstance, including investment property!

Find out more advantages to doing a short sale here: San Diego Short Sales

Remember, knowledge is power! Find out all your options before it's too late! Contact us for a free, no obligation consultation. (619) 890-7447

Looking for a home? San Diego Real Estate

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Why Would a Lender Approve a Short Sale?

If a lender rejects a short sale in San Diego, they will wait several months to get the property back through foreclosure, then take several more months to get it sold. During these many months, the lender has received no payments and the market has likely dropped further.