You’ve probably heard the term “short sale” in connection with real estate buying, especially in light of the many foreclosure deals plaguing the real estate industry. You’ve also probably seen a few “short sale” signs on a few homes and wondered what that was all about.

In a nutshell, the “short sale” term refers to a transaction made between a homeowner and a lender (either a bank or a lending institution) that usually involves the following conditions: (1) the homeowner is in default of his mortgage payments, probably close to being foreclosed and has not yet filed for bankruptcy, as a result of financial hardships; and (2) the lender is willing to accept taking a small financial loss and forgives the debt owed.

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A Call to Agents

My superiors, the President and CEO of Axia Real Estate Group in San Diego, have asked me to write a blog announcing that we have now expanded our business into Riverside County and that we are looking for agents to work in both Riverside and San Diego.  I said to them, “Superiors, with all do respect, this is not something to discuss on a blog. This is something to announce on the home page of the website or take out an ad in the Reader or SignOn SanDiego.”  As you can tell by the fact that I am indeed writing a blog on our business expansion, I did not win this argument. And so, without further ado, let me introduce to you, Team Aguilar of Axia Real Estate Group:

Under the direction and leadership of Carlos Aguilar (President), and Howard Blum (CEO), Axia Real Estate Group, Inc. has been helping buyers and sellers in the San Diego region for over a decade. Carlos loves using the line that he has “been in real estate longer then he would care to remember” which was voted by me, to be his most over-used line of 2008. But he has been at it for a long time — originally licensed in California in 1972. The bottom line is, the man knows everything there is to know about real estate in California and he’s a pleasure to work for and with. And even if he wasn’t the one paying my salary, I’d say the same thing.

So, now that Team Aguilar has expanded into Riverside, we are looking for experienced real estate agents to join our group and work both Riverside AND San Diego regions. Agents should be experienced, knowledgeable, and willing to follow up on leads. If you are interested, or have any questions, call Toll Free Number at (888) 317-1496 or email info@teamaguilar.com.

What is it that happens when you suddenly find yourself in a dire situation as a home owner? Your home, once thought to be the greatest investment of your life, an ever-appreciating building block to financial independence, is now valued significantly lower than what you bought it for. You owe more to the bank than what your home is now worth, and if that’s not all enough of a kick in the stomach, your once fixed loan is now adjusting. You can no longer afford the payments on your home and every day that this problem lingers, your anxiety grows and your stomach turns. It is an awful situation that many people are finding themselves in today, and there is only one way to tackle the problem: Head on.

Of course, there are always those who try to finagle their way around a problem, and though in the short term this may seem like a good solution, it will be much more damaging in the long run. One way people have tried to come out of this type of situation unscathed, is by a tactic called Buy and Bail, which is illegal and considered Mortgage Fraud. In this type of scenario, a homeowner, understanding that their home is upside down (they owe more than it’s worth) and they can’t afford the payments, will attempt to buy a new home, claiming their first home as a rental, and once they’re moved into the new place, cease payments on the old home and let it fall into foreclosure.

Some homeowners feel that their current situation is no fault of their own, but rather the real estate agent that led them to believe that home values would never fall, or the loan officer that didn’t explain the consequences of adjustable rate loans, and as a result, they don’t find anything wrong in Buying and Bailing. But not only will letting your house fall into foreclosure ruin your credit, it needs to be reiterated that buying and bailing is illegal. For two reasons: First, in most cases because there is never any intention of actually renting the house out, and in order to prove to the banks that they intend to rent it out, they falsify a rental agreement signed by a friend or relative. Second, and more importantly, it is considered mortgage fraud when a borrower withholds information, such as a deliberate intent to stop making payments on their original home. Banks are now very aware of this type of fraud and it is no longer even a feasible option, but it is important to remember that you would not be helping yourself or your situation by even considering such a tactic. There is another option, called a Short Sale.

A short sale is an agreement with the bank allowing you to sell your home for less than what you owe. At face value, this idea doesn’t help the anxiety churning in your stomach, because you’re forced to sell your home, and even worse, pay taxes on the difference of what you owe to the bank and what you sold it for. But the greatest value in doing a short sale comes in the form of saving your credit and ultimately giving you some peace of mind. Letting a home go into foreclosure is much less of a hassle than a short sale, but the end result is that your credit will be severely damaged, and your ability to qualify for a loan will be put on hold for several years. But a short sale will save your credit from the damage of a foreclosure, and as soon as you are able to, you can qualify for another loan, and find yourself back into a home, credit intact, and the upside down mortgage a distant memory.

Andrew Brentan is a Team Aguilar contributor and responsible for this post.

What should you know? How do you pick a short sale real estate agent to sell your home? Should you even consider purchasing a real estate short sale?

Everything about a short sale can seem difficult and it is!

How does a short sale affect my credit vs. a foreclosure?

Nothing about a short sale is easy! It can be the most frustrating real estate experience you will ever encounter. It might make you want to get out of the real estate business or avoid buying or selling another home.

For buyers thinking about purchasing real estate in this market, a short sale is a great way to do it. On the other side, for homeowners, a short sale may help you avoid foreclosure with minimal damage to their credit.

For Sellers – What factors will make a short sale possible???

The first one is “COMMUNICATION”. This will only be possible if you find an agent that will answer your phone calls, return your calls and keep you in the loop with daily updates.

The second one is “AGENTS PERSEVERANCE”. Your agent should be in contact with the bank on a daily basis to ensure your short sale package is moving forward with the right negotiator.

The third one “BE INVOLVED” Don’t let your agent forget about you, don’t drive him crazy! :) Insist that you are updated and informed regarding the process of the short sale. You don’t want to loose your home to foreclosure because of a break down in communication with your lender. .

For Buyers – What factors will allow you to purchase a Short Sale???

First, find an agent that has a proven track record of selling short sales. If he knows how to sell them it will be easier for you to purchase a short sale. Also, consider all of the other factors explained for sellers above.

In conclusion: You hear so much negativity about short sales. The reality is that loss mitigation departments are increasing their staff and making efforts to accommodate short sales. Short sales will be a large part of this real estate market for the next few years. They are an excellent option depending on your situation. Make sure you are dealing with an agent that will make every effort to look out for your best interest. Real Estate Short Sales are not for everyone and may not be the best option for you!

Short sales have been a large source of business and many real estate agents seem to be focusing on short sales. We get a lot of short sale leads all over the place in many areas that we don’t even provide short sale services. We focus on San Diego County and would like to build a list of short sale real estate agents throughout the entire country!

If you would like to join the list please email me at info at teamaguilar.com or go to our forum post for the “List of Short Sale Real Estate Agents” and post your information for us to add.

If you focus on short sales in San Diego please feel free to join the list. This is meant to give people as many options as possible when they are looking for a short sale real estate agent.

Please provide

Name
Phone
Website & City so we can add you to the list.

Thank you,

IRS Code – Taxation of a Real Estate Short Sale

This information on taxation of a real estate short sale is not to be taken as tax advice. It’s is for general reference only and you should consult your tax preparer.

We receive this question almost daily. I will try to simplify this response to make it as easy to understand as possible. On December 20^th, 2007 President Bush signed into law the “Mortgage Debt Relief Act of 2007“. President Bush was quoted saying the following about this new law, “When your home is losing value and your family is under financial stress, the last thing you need is to be hit with higher taxes.  So I’m working with members of both parties to pass a bill that will protect homeowners from having to pay taxes on cancelled mortgage debt.” ─ President George W. Bush, 9/1/2007

Previously, if your home value declined and you sold your home for less then what you owed to the bank the previous tax code would allow the IRS to tax the amount of forgiven debt and treat this amount as income.

Now, based on the new “Mortgage Debt Relief Act of 2007″ the amount of debt that is forgiven is not tax considered additional income and you will not be subject to paying taxes on the forgiven debt. This would apply to any debt discharged on or after January 1^st 2007 which is secured by a primary residence which the debt is incurred in the purchase, construction, or substantial improvement of the primary residence.

This is the bill as it reads on the house.gov website, source is http://www.house.gov/

Permanent exclusion from gross income of discharged home mortgage indebtedness. The bill would amend current law, which requires taxpayers to include discharges of mortgage indebtedness as income and to pay tax on this income. The bill would provide a permanent exclusion for any discharge of indebtedness (on or after January 1, 2007) which is secured by a principal residence and which is incurred in the acquisition, construction, or substantial improvement of the principal residence. Instead of including this amount as income, the basis of the individuals principal residence would be reduced by the amount excluded from income under this bill. This proposal is estimated to cost $1.379 billion over 10 years.

Long-term extension of the deduction for private mortgage insurance. The bill extends the deduction for private mortgage insurance for seven years (through the end of 2014). Current law limits the deduction for private mortgage insurance to payments made prior to the end of 2007. The bill would provide that payments will qualify for this deduction whenever they are paid so long as the contract is entered into after 2006 and before 2015. This proposal is estimated to cost $570 million over the next 10 years.

Modification of the qualification tests for cooperative housing corporations. The bill would modify the requirements for qualifying for the special rules available to cooperative housing corporations. Under current law, a cooperative housing corporation must meet several requirements, including a requirement that 80 percent or more of the cooperative housing corporation is earned from the corporation’s tenant-stockholders. The bill would provide two alternatives to this 80 percent rule (i.e., one based on square footage and another based on cooperative expenditures). These two alternatives will make it easier to qualify as a cooperative housing corporation. This proposal is estimated to cost $22 million over 10 years.

Modification of exclusion of gain on sale of a principal residence. The bill amends the current law exclusion of up to $250,000 ($500,000 if married filing a joint return) of gain realized on the sale or exchange of a principal residence. Under current law, the sale of a home will qualify for this exclusion if the home is a taxpayer’s principal residence for at least two of the five years ending on the sale or exchange. This exclusion applies even if the home was initially purchased as a second home. Under the bill, if a taxpayer moves their principal residence to a second home, the taxpayer will only be able to utilize this exclusion to the extent that it relates to the period of time when the home was first used as a principal residence. The bill grandfathers use before 2008. This proposal is estimated to raise $2.005 billion over 10 years.

The first and most obvious would have to be that you will not have a foreclosure on your credit report. This is a definite plus. An experienced short sale Realtor will be able to help you sell your home and eliminate the debt from a mortgage you may not be able to afford. You need a Realtor that is up for the challenge because there are are many real estate agents that will not even know where to begin because they don’t have experience doing real estate short sales. It’s unfortunate but many Realtors can’t even explain the foreclosure process.

Another benefit of a short sale may be that it will allow you to avoid a bankruptcy. One option that many people consider to give them additional time in the foreclosure process is to file a bankruptcy but this option depends on the state you like in. One misconception of a real estate short sale is that you will have to pay the real estate commissions out of your pocket if you are approved for a short sale. If your property is accepted as a short sale and the deal is able to close, you won’t have to provide closing costs to close the deal. The bank will pay all of the closing costs and Realtor commissions when they approve a short sale. Often they work the agents down on their real estate commissions but this item is not something you will have to pay or worry about. All of the items paid in escrow at closing are factored into the banks expense when they decide to approve a short sale.

If the short sale is approved your Realtor may be able to save you from having a Deficiency Judgment issued against you for the short fall in the amount collected from the short sale and the final balance of the Summary Final Judgment. Many of the states have different laws and guidelines for their foreclosure process so be sure to check what applies in your state. 

Another thing to keep in mind is that congress has recently passed new laws that will eliminate the short sale amount from being taxed as ordinary income. In the past borrowers that completed a short sale would receive a 1099 at the end of the year for the amount of money that the bank took as a loss. Under the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) homeowners that do a short sale on a primary residence will not have to pay taxes on the short sale amount. This does NOT apply to investment property. This new Mortgage Forgiveness act is only for Primary Residences.

If you have any questions about real estate short sales please feel free to ask. We handle real estate short sales in San Diego County but also know agents in other parts of the country that we may be able to refer to you.

Bienes Raices en San Diego

Existen tres niveles de propiedades en el Mercado de propiedades con diversos niveles de problemas:

A – Short Sale. El dueño debe más de lo que vale la propiedad y pretende entregar al banco lo que pueda recuperarse de la venta. El diferencial entre lo que debe y en lo que se vende es una pérdida financiera para el banco pero fiscalmente entrega un 1099 – ingreso extraordinario al vendedor para que pague impuestos sobre el perdón de esa deuda, el banco deduce fiscalmente. Comprar este tipo de propiedades resulta incierto y largo, normalmente encontraras propiedades dañadas. El banco se resiste a perder dinero y centraliza el proceso; sus decisiones son tardadas y al final de cuentas puede decidir no venderla… solo perdiste el tiempo.

B – Foreclosure. El banco inicia proceso legal para reposeer una casa y venderla. Hay evicción del dueño y las propiedades están aun mas dañadas que las de arriba mencionadas ya que la gente esta enojada y no tiene mas que perder. Es común encontrar que se llevaron refrigerador, lavadora, secadora, alfombras quemadas o dañadas, etc. El dueño es afectado fuertemente en su historial de crédito, el banco busca perder lo menos y sus procesos son tardados.

C – REO – reposeídos por el Banco. El banco se convierte en el dueño de la propiedad y es quien directamente vende a través de un agente o broker. El banco ya lleno mucha parte de sus requisitos para documentar la perdida y acepta vender a un precio que fue ponderado por ellos. Saben que perderán dinero y quieren rápidamente convertirlo en dinero – lo más que puedan pero lo más rápido –

D – Esta categoría implica tomar ventaja de la presión de casas con problemas, para comprar una casa buena a buen precio sin tanta complicación.

En lo particular veo más oportunidades al buscar comprar tipo REO – Reposeídos por el Banco -o tomar ventaja de las condiciones del mercado para negociar directo con dueños. Es mejor negociar con dueños que con bancos.

Veo que dependiendo de la zona, hay oportunidades donde puedes comprar a precios similares casas ACTIVAS convencionales a las que tienen problemas. Acuérdate que la ley inmobiliaria dice LOCATION< LOCATION< LOCATION. Si buscas comprar en zona deseada, más improbable encontrar una ganga como la que se presenta en un área no deseable. Ejemplo: Del Mar contra Imperial Beach. Fashion Valley contra Logan.

También se promueve mucho la venta en AUCTIONS; hay muchas cosas que no te dicen.
El precio de venta se incrementa un 5% de comisión por comprar – ojo cuando compras tu no pagas comisión pues el vendedor de la casa es quien paga y de ahí sale el 3% que gana tu agente!!!

En Auctions compras AS IS, igual que cuando compras un carro usado, si te sale limón, con limón te quedas.
Las casas promovidas a precio increíble, seguramente es porque están en pésimas condiciones y requerirás invertir mucho dinero para ponerla en condiciones funcionales. Tienes el riesgo muy elevado ya que pretendes una utilidad importante.

Alto riego, alta utilidad y quizá sin control del estado de las cosas.

Bajo riesgo, menor utilidad pero con control de las cosas

Como profesional en esta industria, estoy convencido que depende del interés particular y la zona de confort de la persona, es el traje que sentará mejor al cliente. No hay receta, hay trajes a la medida. Un volado de 500k para algunos será no trascendente, para otros es el proyecto de su vida.

Quienes experimentan un quebranto seguramente no quieren cometer el mismo error y volver a perder dinero. Pero siempre hay primerizos que se echan a la mar sin saber nadar.

Quienes compran Foreclosures son personas que saben lo que hacen, tienen dinero para especular, saben evaluar de un vistazo – ese es su expertise -, tienen gente y ellos saben hacer los trabajos necesarios para reacondicionar las casas, tienen el tiempo para investigar y tomar ventaja de las condiciones del mercado. Competir contra ellos es igual que ir como particular a comprar un carro al remate y competir con un mayorista. Difícil salir bien librado.

Espero haber sido ilustrativo. Si tienes dudas, por favor pregúntame lo que desees.

Saludos

Manuel Muniz
Bienes Raices en San Diego
Realtor & Mortgage Consultant
Cell: 619-370-7473
Fax: 619-489-2669
Email: mmuniz@axiasd.com
Web Page: Bienes Raices en San Diego

Documentation Needed For a Real Estate Short Sale

Realtor:
- Letter of Authorization (signed by seller)
- Letter of facts about the property
- Market analysis
- Photo’s (not the glamour shots)
- Copy of all showings with dates and feedback
- Copy of Listing Contract
- Copy of Purchase Contract (if applicable)
- Review letter of hardship
- Send to Loss Mitigation Department

Seller:
- Two years tax returns with W’2s
- Three months bank statements
- Current monthly budget
- All mortgages with account numbers
- Any pending bankruptcy
- Hardship letter (make them cry)
- Last 30 days pay stubs (if applicable

We handle short sales in San Diego County. Call today to discuss your options and the possible ways to avoid foreclosure.

I have assembled a list of questions that I receive from my clients prior to me helping them with a real estate short sale or help them avoid foreclosure. I hope this helps you understand what I am here for and how I can help you avoid foreclosure. I specialize in real estate short sales. Please contact me with any additional questions.

Answers to common Real Estate Foreclosure Questions

Q. Why should I trust you to help me?

A. I know at a time like this it is hard to trust anyone other than your family. I will earn your trust by doing things to help you. If you will give me the chance, I believe that actions speak louder than words.

Q. I tried to sell my home and I owe more than they are selling for?

A. I know the market is tough for sellers today but there are so many options for you to consider.

Q. I can’t even sell my home for what its worth, how would I ever pay you?

A. Well in most cases if you would consider a Real Estate Short Sale I would be paid by the bank or mortgage company. Remember the last resort would be to just let it go. I also might be able to recommend you to someone in my professional team to further advise you.

Q. If I sold my home where would I get the cash to satisfy all parties?

A. Good question, Most of the time you will be far better off owing a small deficiency rather than the whole amount. At this point am I safe to say you don’t have any money at this point to apply to any deficiency? The banks do not want to foreclose however they will do what they have to too get their money back.

Q. Why should I sell my home just so you can make a commission?

A. The answer is simple, I don’t want to just sell your home to make a commission, I have a better reason and that is I make a living by selling homes and helping people buy them. But a long time ago I realized that I made a lot more money and friends by doing the right thing for each and every client. You see I have helped several people in your situation avoid foreclosure and not always did we sell their home.

Q. What kind of guarantee can you give me that you will be able to sell my home and get me out of
this situation?

A. I could or would never give anyone a guarantee, but what I will do is assure you that I will do every
thing possible to help you find the best alternatives to your situation. I will also work directly with the
banks and others to get them off your back. I have a high success rate in dealing with the banks as well
as get you top dollar for your home.

Q. If I sell the home how will be able to move?

A. If you are referring to money, remember to save the payments you would have paid to the banks while we are in the selling process. That should more than cover moving costs as well as other related costs of moving.

Q. Aren’t you just like everyone else, you just want to stick your hand in my pocket?

A. NO. I actually want to offer my assistance in any way I can. The first thing I want to tell you is
something you may not know. Do you know all the ways you can stop a foreclosure? I do and I want to
share them with you.

Q. I have called the bank and they won’t help me?

A. All they want is paid and paid on time. I have a way with the banks that will help you in the long run. I also have an entire list of Government and non-profit agencies that might be of assistance. I have seen some cases where they will help with some of the past due payments so you don’t lose your home.

Depending on what your real estate needs are, you can view our Real Estate Short page here @ this link Real Estate Short Sale For information on San Diego CA Real Estate contact Carlos for San Diego Real Estate.

Carlos Aguilar
Team Aguilar
San Diego Foreclosure Information