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The House and Senate Have both passed the “Fiscal Cliff” deal also called “The American Taxpayer Relief Act of 2012”. It is only waiting on the President’s signature. Politics and opinions aside; included in the Act is the extension of the Mortgage Forgiveness Debt Relief Act as the bill currently reads(Section 202). Fiscal Cliff Bill.
This will affect what our real estate market looks like this year. If you are considering selling your house through a short sale it sounds like the proposed extension will* give you some incentive to make sure that the short sale is completed this year.
*To determine if you qualify for Mortgage Forgiveness Debt Relief Act and Debt Cancellation you should seek the advice of a competent CPA or Tax Attorney.
As stories regarding the $25 Billion Foreclosure Settlement are being released my Boise Short Sale Website and Boise Short Sale Blog traffic has increased as have the phone calls and emails from hopeful homeowners with under water properties. The question is how will this help me?
Emily Knapp in her article “Who are the Biggest Beneficiaries of the $25 Billion Nationwide Mortgage Settlement” answers this question most succinctly, “…despite the obvious benefits for individual homeowners, the settlement’s effect on the housing market as a whole may be rather limited. Only customers of the five servicers involved in the settlement are eligible for principal reductions, and only if their loan is not owned or backed by government-controlled mortgage financing firms Fannie Mae and Freddie Mac. Those and other limitations mean fewer than 5 percent of the nation’s 11.1 million underwater homeowners will be eligible.”
5% is an awfully low number of individuals helped. If you need to sell your house and are underwater please drop me a line, lets talk…
Sounds like good news right? The numbers are down in line with some of the seasonal trends we have seen in the last few years. While some folks may be saying this is the sign we have hit or are nearing bottom; folks are still getting going into default, banks are still foreclosing, there is shadow inventory that needs dealt with so we have still have plenty of snow available to keep that snowball growing or at least maintaining its size.Click here for the CNBC article.
In working with clients sometimes they are trying to decide if they should borrow money, go into debt, etc to hang onto the house. You may be considering the same in light of some of the less negative news in the press.
It isn’t unheard of for my clients to be 40-60% underwater on their properties. It makes sense to consider the big picture. I have found it beneficial to walk through the scneario with my clients to see what makes sense.
Lets say we have the following that is a typical scenario:
Value at peak 4 years ago (loan amount) – $250k
Current Value – $150k
Depreciation over 4 years – $100k
Average appreciation in a healthy market (for our area) @3%
The question is how many years in a healthy market will it take to recover the 40% loss?
A long time.
I am not suggesting that home owners should choose to default on their loan because they are under water. I won’t ever tell a home owner to stop paying their mortgage. But borrowing from credit cards, family, personal loans, etc. at some point seems to be throwing good money after bad.
Some buyers touched base with my wife and me over the weekend to take a look at a $600k short sale property. We lined up a time to take a look but before heading out to show the house I dropped the listing agent a line.
The short sale was being marketed as an “Approved Short Sale” so I wanted to make sure what the listing agent meant as the answers you get to that question really vary. Just a pet peeve it should have been listed as a “Previously Approved Short Sale” but I digress. I asked the obligatory questions of who’s the bank, what do you mean by approved, is the file still open and active with the negotiator at the bank, etc. I “foolishly” asked if any buyer closing costs had been approved…the listing agent went into a big rant about Bank of America not EVER agreeing to pay any buyer closing costs. I tried to tactfully convey that they do but quickly realized I was dealing with an “Expert” who wouldn’t accept any questioning of her authority on the short sale process, BofA short sales, and on who came first – the chicken or the egg. I tried to chalk it up as someone having a bad day, on an ego trip, etc. but then confirmed my suspicion that this expert hadn’t closed too many short sales and surely not too many with BofA. 9 … 9 short sales total closed and she was the authority on BofA short sales?
I bit my tongue and headed out to show the house.
I arrive at the house and who is at the house – none other than the “Expert” listing agent (this is not customary in ID for the listing agent to be at the house during a showing). Turns out she was waiting for the water company to turn on service to the house. It was a 6,000+ sqft house on a fair size lot so we spent an hour or so checking out the property with Ms. “Expert” Agent hovering, trying to interject in conversations, and watching us through the windows as we walked the grounds. As we were wrapping up the showing Agent “Expert” was hanging around the door and quickly stated that the house was approved for “x” and that to write an offer for anything less than that would be a waste of time. Wonder if her Seller would like to hear of that? She then went on bad mouthing her seller clients and also another agent that had presented an offer lower than the previously approved offer. Classy. Then as the buyers went back through the house to check out a couple more things I stood there talking with the “Expert”. She told me short sales were all she did and insinuated she had a sizable number of short sales currently listed (4 times the actual number she has listed). She then told me all about her expertise and reiterated that short sales are all she does and that oh by the way she teaches short sale classes. yeeesh…..
After she finally left the property my clients chuckled at how big a head the agent had and I gave them the low down on her actual numbers and explained the reasons that she may have said some of the things she had, etc. Needless to say my buyers were not impressed with this agent, we both knew she was full of it and herself.
As I drove away I wondered how someone gets paired up with an agent that discourages offers, bags on her clients, etc. I felt sorry for her clients and then later in my drive I felt sorry for for Ms. “Expert” as it seems a rough existence to be so full or yourself and/or delusional to twist closing 9 of 42 short sales into a performance that qualifies her as an “expert” all the while helping clients down the road to foreclosure.
Don’t be fooled when looking for an agent to help you short sell. Coming through 22% of the time won’t keep you swinging a bat in the big leagues even if you look and sound the part. If foreclosure is what you are trying to avoid you want an agent that bats far better than .220 – give me a ring.