|Considering a short sale as a Bank of America mortgage holder? Well make sure you hire an experienced, proven short-sale agent and that they are current on that lender’s process.
Below describes some new changes to B of A’s shot sale process imperative tot he successful completion of your short sale.
(Re-Printed from B of A email correspondence 07/31/2014)
NAR Issue Brief
Mortgage Debt Cancellation Tax Relief
Update on the current status of the mortgage debt cancellation tax relief provision that expired at the end of 2013. As soon as the last one-year extension was passed on New Years’ Day 2013, NAR began working on another extension of this critical tax provision. With NAR’s encouragement, champions of this provision introduced bi-partisan bills in both the House and Senate (H.R. 2994/S. 1187), to extend the provision for one or two years. Unfortunately, the current prospect of these bills being enacted in the short term is not particularly high. We are facing four big hurdles.
1. The Chairmen of both of Congress’s tax committees (Senate Finance and House Ways and Means) have committed to passing comprehensive tax reform legislation before the end of 2014. As part of reform, they have both indicated that they plan to go through the long list of expiring items, including mortgage debt cancellation, and cull those that are not worthy of permanence and make all the “worthy” ones a permanent part of the tax law. However, tax reform is unlikely to be completed in the coming months. If Congress were to extend the expiring provisions now, it might appear that they were giving up on tax reform. This is not a signal they wish to send.
2. There are over 50 such expiring tax provisions (often referred to as “extenders”). Congress rarely passes single tax provisions by themselves. The rules in both the House (and especially the Senate) could allow for added amendments that would turn a simple bill with wide support into a politically divisive bill.
3. The extension of the tax relief “costs” money to the Treasury. The Joint Committee on Taxation estimates that a one-year extension of the mortgage debt cancellation relief would cost $3.7 billion. Some Members of Congress will insist that amount be offset by raising taxes elsewhere or cuts in spending – an ongoing debate in Congress.
4. The Chairman of the Senate Finance Committee, Senator Max Baucus of Montana, has been nominated by President Obama to serve as the next United States Ambassador to China. His departure from the Senate will turn the chairmanship over to Senator Ron Wyden of Oregon. As with any change in committee leadership, there will be an adjustment period.
In sum, NAR tried to have the extension passed by year-end but it was not possible. Because of the factors listed above, NAR has so far decided not to issue Member-wide Call for Action at this time, but has instead focused on working with Congressional leadership and the bill sponsors to find additional support for moving this legislation now that Congress has returned to Washington. Our lobbyists are in daily meetings with Members of Congress, pressing for an extension and providing the most up to date data on short sales and foreclosures to continue to highlight this as a top priority.
What can you do? First, you can contact your Representative and Senators to urge them to act on these bills. If you are in distressed situation, urge them to do so as well. The more Members hear from constituents, the better.
NAR cautions REALTORS® against giving clients tax advice, as every situation is different, but at this point our best estimate is that Congress will pass some extension of this law, probably late in 2014, and make it retroactive. There is precedent for Congress doing this, but no guarantee.
NAR cautions REALTORS® against giving clients tax advice, as every situation is different, but at this point our best estimate is that Congress will pass some extension of this law in 2014 and make it retroactive. There is precedent for Congress doing this, but no guarantee.
The California Association of REALTORS® announced yesterday it received a letter from the California Franchise Tax Board (FTB), obtained by Board of Equalization (BOE) member George Runner, clarifying that California families who lost their home in a short sale are not subject to state income tax liability on debt forgiveness “phantom income” they never received in a short sale.
Last month, in a letter to California Senator Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so called “cancellation of debt” income to the underwater home seller for federal income tax purposes. Following the IRS’s clarification, C.A.R. sought a similar ruling by the California FTB. Now with the FTB’s clarification, underwater home sellers are also assured that they are not subject to state income tax liability, rescuing tens of thousands distressed home sellers from California tax liability for debt written off by lenders in short sales.
“We are pleased with the recent clarifications issued by the IRS and California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California,” said C.A.R. President Kevin Brown. “We would like to thank Senator Boxer and BOE member Runner for their leadership in obtaining this guidance from the IRS and FTB. Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability, even after the Mortgage Forgiveness Debt Relief Act of 2007 expires at the end of the year.”
This is wonderful news for California families still struggling with an underwater home. We still recommend all REALTORS® encourage their clients to speak with a tax professional who can advise them on their specific situation. This information in no way should be taken as either legal or tax advice.
(Sacramento Association of REALTORS® Web Log, Caylyn Brown Thursday, December 5th, 2013)
Homeowners who lost their homes at unprecedented numbers inadvertently created extraordinary opportunities of home ownership for both investors and owner occupants. Upside down home ownership blazed a grave trail with foreclosures and short sales (distressed sales) paving the way of Sacramento’s “buyers’ market”.
The recovery has been painful and volatile. At the height of the crisis, industry analysts were incredibly optimistic predicting it would last only a year or two at the most. Seven years later forecasting continues to be a challenge. Just as the mainstream media seems to sync with the analysts, Bernake speaks, interest rates bump up overnight, and you and I get to buckle up for another exciting ride in the wonderful world of real estate. However, there is actual evidence that recovery may truly be underway.
AND NOW THE LIGHT AT THE END OF THE TUNNEL
An analysis by RealtyTrac Inc. shows Sacramento as one of the hottest turn-around markets and predicts we are headed for a more normal pattern because of a rapid increase in new-housing permits at the start of this year and a significant drop in foreclosures.
To give you an idea of what that foreclosure drop looks like and some comparisons, the breakdown of sales for May was 115 REOs (6.9%), 371 short sales (22.2%) and 1,186 conventional sales (70.9%). Compared to one year ago, REO (bankowned) sales accounted for 27.8%, short sales 30.1% and conventional sales 42.2%. Since then REOs have dropped 75.1%, short sales dropped 26.2% and conventional sales have increased 68%.
However, low inventory remains a serious issue for buyers, especially would be first time buyers. Compared with May 2012, the sales volume has decreased 7.9% from the 1,816 units sold. Although active listing inventory increased for the month of May, rising 7.7% from 1,381 units to 1,488 units, the months of inventory remained at .9. This number explains the amount of time (in months) that it would take to deplete the current inventory at the current sales rate.
SAR President Chris Little adds his observations: “The number of listings continues to decline and months of inventory remain exceptionally low with supplies lasting less than 3 weeks. Both the median and mean sales prices continue to increase significantly and cash buyers, though significant, are a declining portion of the buyers.”
WHERE’S THAT LIGHT AGAIN?
So when will we begin to see some of this new inventory from the housing permit increase? According to an article in the Sacramento Business journal, “Large homebuilders are snapping up the available lots out there, with plans to build on them as soon as possible, according to Jim Radler of Land Advisors organization in Sacramento… JMC Homes bought 54 finished lots called Sienna in an unincorporated area north of Elk Grove, between Calvine and Robbins roads and east of Elk Grove/Florin Road, near a strip mall.” As soon as this time next year we can begin to see move-in ready new home construction.
SAR President Chris Little continues, “Demand is high, supply is very low and investors are moving away. If interest rates continue to rise and lender practices continue to be stringent, it may flatten the rising demand due to challenges for buyers on the financing side. Therefore, homeowners with equity and a desire to sell should act on it and consult a REALTOR®.”
All these combine to make it a STRONG sellers’ market. With inventory on the rise and interest rates still at record lows, it’s STILL a great time to buy and sell. If you or someone you know is looking to buy or sell, give us a call.
(Market Data – Sacramento Association of REALTOR’s RESIDENTIAL RESALE STATISTICS May 2013)
In the news, there is talk of a housing recovery. Experts feel more optimistic about the state of housing industry in America. However, if you or someone you know is one of the millions of homeowners who is stuck with a home on which you owe more than the property is worth, the feeling of helplessness can be overwhelming and frustrating.
Many people don’t realize that just because they are in danger of losing their home to foreclosure doesn’t mean they have to wait around for it to happen. With help, they can take matters into their own hands.
CLAIM YOUR TICKET TO FREEDOM!
As a Certified Distressed Property Expert (CDPE), I make it my business to know all of the ins-and-outs of the options that are available for people who are in danger of losing their homes and help the challenges head-on.
Take a look at the information on this site and then Contact me today to schedule a free, confidential consultation.