Arn Cenedella

Archive for the 'Foreclosures' Category

A short sale does not mean you do not owe the lender any more money

Many homeowners believe that if their lender agrees to a short sale, they have no further obligation to the lender.

This is not true!

As the Wall Street Journal reports today, many lenders are being more proactive about going after homeowners for the remaining unpaid balance on loan. For example, if the mortgage balance is $400,000 and the lender agrees to accept $300,000 in a short sale – the lender can ask the homeowner to sign a note for the $100,000 remaining. Other lenders have gone to court to obtain the additional money from other borrower assets.

So be sure you understand what the lender is agreeing to when they approve a short sale. Have your attorney review the agreement or negotiate it for you.

Understanding the tax implications of a short sale

I have written several posts advising homeowners in trouble with their mortgage to consult both their attorney and their CPA before agreeing to a short sale.

The Wall Street Journal has written a good post highlighting the potential tax impacts of doing a short sale.

Homeowners could be tax on the gain in their property even if they do not get any cash out of a short sale which is how they always work. Say someone bought a home for $200,000 several years ago and at some point refinanced for $350,000. The property was then sold via short sale and the lender agreed to take say $300,000 as pay off for the loan. This homeowner could be charged tax on the $100,000 gain since they bought at $200,00 and effectively sold at $300,000.

In addition in the above example, assuming the lender forgives the $50,000 debt not collected through the short sale (lender owed $350,000 and received $300,000), the homeowner will have a taxable income of $50,000.

It is not the intent of this post to give specific concrete advice about short sales but rather just alery everyone that there are complex legal and tax issues that must be dealt with. Do not agree to anything before you get this advice. A mistake here could result in a big tax liability.

Do any of these government mortgage relief programs work?

I have generally been pretty skeptical about whether any of these much talk-about government programs will actually help any homeowners? Are these programs just more of the “promise a lot, deliver a little” that we seem to get out of Washington DC the past 10 years or will they actually help people.

I like to stay in touch with my past clients on a regular basis and try to speak with each of them at least every quarter and often once a month.

Today I called a first-time home buyer, Jim, who in January 2009 bought a home in Redwood City at a very affordable price. After a few minutes of chit chat, I suggested it might be a good time to look into a refi since rates have dropped maybe about 1% since they bought. He told me that they were already working on that through the Making Home Affordable program. They hope to reduce their rate over 1%.  Jim said since he mortgage was owned by Freddie Mac and Fannie Mae, Jim and his wife, Lynn, were eligible for an interest rate reduction. Please understand, Jim and Lynn are current on their mortgage payments – a requirement for the loan refinance. Jim and Lynn purchased with 5% down on a house a little over $500,000 – so a typical refiance that requires 20% equity is not possible for them – but with the MHA program refinances up to 105% of the value are allowed.

Jim told me they hope to know by June whether their application will be approved.

I am interested to see if the progrma will actually work as intended and reduce their loan payments to a more affordable level. Stay tuned and I will keep you posted.

Check the Making Home Affordable site for more info.

Click here to see if your loan is owned by Freddie Mac and Fannie Mae.

Is the real estate market approaching bottom?

The Sf Chronicle often paints a fairly bleak picture of the local real estate market.

However on today’s front page, the San Francisco Chronicle reports on some postive movement in the market.

The SF Chronicle reports that the Bay Area median price is around $300,000 and that with a Bay Area median income of $80,000, one can now buy a median price house.

Furthermore, 5,000 homes a month are purchased in the Bay Area.

Are we at the bottom? I do not know – but I think we are getting closer.

I do believe this is a good time for the first-time home buyer and novice investor.

Habitat for Humanity purchases their first REO in Menlo Park

Habitat for Humanity just entered into contract to purchase a home in the Belle Haven area of Menlo Park.

With the price of bank foreclosure REOs being so low, Habitat has started a program to buy existing homes, rehab them with volunteer labor and turn them over to new owner occupants.

If you have any lender contacts that handle REOs, please let me know as it might be to everyone’s benefit to have some of these REO purchased by Habitat for sale to owner occupants as opposed to selling to investors. (At the present time, most REOs are purchased by investors.)

As the exclusive buyer agent for Habitat in San Mateo County, give me a call and let’s talk.

Do you need help selling your home with a short sale?

I have recently sold a short sale in Redwood City representing the buyer and another short sale in East Palo Alto representing the seller.

Do you need help evaluating your options? I am glad to help. I have undergone short sale specific traing and have the process and procedure down. It is still time consuming but I can handle short sale without making the mistakes that add time to the process.

One of my blog buddies in the East Bay, San Benson, has been approved by Wachovia as an approved short sale agent. He provides good useful information, click here.

Obama Home Mortgage Rescue Plan part 6

One of the things President Obama promised was greater use of the internet to make information about government programs and activites more accessible to the general public.

The MakingHomeAffordable website is now up and runnning.

This is a very useful site which will help homeowners determine if they are eligible for either the refinance plan or the loan modification. You can find out if your loan is owned by Freddie Mac or Fannie Mae.

There is a wealth of information here. Check it out.

If you need further guidance just let me know.

Where are all the foreclosure properties?????

Many buyers are looking for foreclosures – in hopes – of buying a good deal.

While buying a foreclosure propertry (ie REO) may often be a good deal, you will not find many in the prime residential communities of the San Francisco Peninsula where the average home prices are well over One Million Dollars. One can find foreclosures in areas that were financed with sup-prime mortgages – these are typically areas where the peak price was $500,000, $600,000 and maybe $700,000.

Dave Blockhus Coldwell Banker Los Altos, for example reports there are only 3 foreclosure properties for sale in Los Altos.

When I get a change, I will run the numbers for Palo Alto, Menlo Park, and San Carlos but I suspect the numbers will be the same.

Obama Home Mortgage Rescue Plan part 5

Obama’s plan contains 2 main parts:

1. Refinance options for loans that are up to 105% of the current market value of the home.

2. Loan modifcation programs for people where option #1 does not apply and they are having a hard time making the monthly payments.

Obama has named the plan #1 – Making Homes Affordable.

Katie Curmutte, Zillow on Mortgages Unzipped blog provides lots of details on the plan.

Katie covers option #2.

Further details are available at: http://www.financialstability.gov/ and here and over here too.

If you are a homeowner in trouble or just want to know what your options are, just let me know.

I have written several posts on this issue and these posts contain links to other great information.

Regulations and Forms available for $8000 first time home buyer credit

Diane Tuman of Zillow provides all the latest info on this credit.

I have recently represented a young first-time home buyer who got into contract on an REO prior to the passage of the stumulus package but they closed after the package becoming law so they will receive the $8,000 credit. That was an unexpected and very welcome bonus to buying a home.

Take advantage of this credit and the $10,000 CA state credit.

Contact me for more details.