Shortening the Short Sale

In many instances in our market, we are finding that homes are worth equal too or less than their value of four years ago. This has caused an extreme increase in foreclosed properties and given rise to a formerly lesser used practice of the “short sale.” A short sale is not a new option by any means, I recall a period of short sale mania in Southern California in the late 80’s. It is however, become so prevalent on a national level that it is on the tip of every real estate agents tongue. In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.With the current unfortunate market conditions, some real estate agents with little or no experience otherwise have begun the unsavory practice of taking a three hour class and promilgating themselves as Short Sale Experts or worse with no experience in closing this complicated type of transaction, conducting seminars, or simpy adding a page to their web site that suggests there are certain things that must be done in order to facilitate a short sale. Be very careful. The fact of the matter is that, from the point of this writing, there is not Standardization among lenders as to how they deal with Loss Midigation. In our current book of business we have two short sales pending. The process from start to finish with two separate lenders couldn’t be more different. One lender asked for more documentation from the seller than was required to obtain the loan in the first place. They also had a certified appraisal performed on the property. The other lender asked for one document to be signed and hade a Price opinion conducted, period. There are no rules for this across the board, each of the thousands of lenders are as individual in their process as the people requesting a short sale.

The best thing to do when considering the right Realtor is ask, “how many short sales have you closed in your real estate career.” and, more importantly, ask for references! 

Cathy Barris and JD Dakoske

cathy@JDandCathy.com

jd@JDandCathy.com

 

Michigan Senate Acts on “Pop Up” Tax Moratorium

Yesterday, the Michigan Senate took action in passing legislation to stimulate the housing industry in Michigan.  The Senate Economic Stimulus Plan gives a boost to the housing industry by providing property tax relief, while putting more money back into the home owner’s pocket.  It does so by offering a window for home buyers to avoid the pop-up tax now and for the duration of their home ownership.

 The Senate package (SB1065, 790, 791, HB 4215) alleviates the issues of homeowners who continue to lose equity in their homes, while allowing potential home buyers who continue to lose equity in their homes, while allowing potential homebuyers to move forward with the dream of home ownership without financial penalties.  Senator Jud Gilbert (R-Algonac) and Senator Roger Kahn (R-Saginaw Twp) spoke on the Senate floor yesterday and stressed the importance of a “pop-up” tax moratorium in order to boost Michigan’s housing market while spurring the economy.

Details of the legislation include:

• 791 (Kahn substitute) offers immediate substantial relief for Michigan taxpayers who purchase a home within the next 33 months.
• SB 1065(Cassis) - Increases the Homestead Property Tax Credit from $1200 to $1300 to those who qualify.
• 790(Pappageorge) - Increases the income thresholds of the Homestead Property Tax Credit by $10,000.
• 4215(Gaffney) - Extends principal residence exemption to unsold homes.

 You may recall that a similar package was introduced in the House last year, which implemented an 18-month moratorium on the “pop-up”.  The Senate plan creates a 33-month window.  It works by providing an income tax credit to reimburse homebuyers for any “pop-up”.  Those homeowners with no income tax liability would still receive a check from the state for that “pop-up” amount.  Jeff Young, 2008 President of the Michigan Association of REALTORS (r) said, “While the House and Senate plans differ in their mechanics, we are confident that both sides will come together and work to provide aid to homeowners and homebuyers.  This will give Michigan’s economy a much needed shot in the arm.  I’m extremely please that both House Speaker Dillon and Senate Majority Leader Bishop are working on much needed relief.  It is obvious that both the House and Senate understand the important economic role the housing market plays.  This is a historic time for homebuyers, and it’s a great time to buy.”

 Information provided by Michigan Association of REALTORS