Gary,

I'll take three whats to go and put them in one bag.

Your advise to hire a good attorney is great but If one is in a rotten position to go into bankruptcy or foreclosure, don't you think they would have no money to hire an attroney in the first place?  And I suspect a good and experienced attorney would want a chunk of money up front before they would even give out a "free" consultation.  

John

Thanks, Gary.

Gary, I'm going off the meds. I am heading straight to the liquor cabinet. (John's fault bringing up St. Patty). I am so sick and tired of hearing about Short Sales, death by electrocution (small increasing doses until I am pronounced dead) seems like a happier time.

The banks are not interested in helping the homeowner. It is six to eight weeks to get a response that the bank is sending out an appraiser. It will be another two to four weeks to hear them say yes or no. Most of these home owners in trouble have two mortgages. Yes, I know there are exceptions and sometimes it does work. But, if you listen to Fox News and read a daily paper, you would think the telephone, or the wheel had just been invented - Short Sales!

Banks have good reason why they don't want to help. It is called insurance. Yes, most are self insured to a dollar amount and then it (the bundled loans) rolls over to umbrella coverage. Let them all ride until they meet the coverage value. Let them go to sheriff sale and make the 2d Mortgage Company buy the loan. Let the red ink land on someone else's books. The first thing the bank wants to do is cut your commission. Sounds like most of the homeowner today looking for discount service rates and premium service.

If I hear one more person tell me about "Short Sales" I may just slit my wrists. I have been to more "forced" education seminars than I can count. One guy had written two books on the subject. They were available in the lobby at a discount. They were also out of date regarding the way Short Sales are handled today. Today’s money is not in selling homes, it is in the talking about selling homes to real estate agents. We need to write a book and go on tour. Erin Go Bragh!

Gary, I just completed a short and what blew my mind was that the seller's disclosure of hardship (they defaulted with 16 months of purchase) would conflict with their loan application as nothing had changed.  The title company is closed and has been under investigation.  

Did you see that Countrywide is offering a $2,000 credit to purchase one of their foreclosed properties if the new buyer puts the loan back with them?!!  

There is a new financing program out there through FHA that will refinance the short if they have not filed for bankruptcy, I believe.  Its throwing good money after bad.  I don't know how that will work if the Shorts are already in trouble.  

Shorts aren't for every agent and the liability is up there.  

And Greg, when you cut your wrists, can you please not make a mess.  Blood is so hard to clean up on carpeting.  Long story short, you will be hearing alot about shorts for another couple years.  

Great info Gary!

"Long story short, you will be hearing alot about shorts for another couple years".  Very funny stuff, Barb. Glad you haven't lost you sense of humor.

Let's all be happy that the CEO's have a golden parachute and the FED is protecting the Bankers. I'll drink to it!

"Let's all be happy that the CEO's have a golden parachute and the FED is protecting the Bankers. I'll drink to it!"

Greg your statement is right on and it is so sad.  Wait until tomorrow.  The news won't be any better.  What bar are we meeting at?

Barb,

All Irish pubs are wide-open tonight.  Go celebrate, drink lots of green beer (take a cab back home) and forget about real estate for the night.

______________

Gregory,

On February 28.  I went out with my buyers at 2:30 PM, set out to show them 5 condos.  On the 4th condo, they fell in love with it.  They didn't want to see the 5th one; they wanted to make a written offer on it immediately.  We went back to my office, drew up the "very reasonable offer", and faxed it to the selling agent; selling agent called back in about one hour with a "very reasonable" counter (we went verbal counter at that point); I called my buyers, they agreed.  I drove up to their hotel to sign the finals.  

A cash deal that is closing on the 28 of this month.  THAT IS WHAT I CALL A SHORT SALE!

John

John, U the MAN! Coffee is for closers.

Be careful, Gary. I drank my beer until I turned green and I don't know what my Irish friends see in it. Thankfully, there are no aligators in the NJ toilets.

Gary:

Good post.  Always recommend an attorney or tax advisor to clients in short sale.  It is a violation of license law to give legal advice as we are not licensed attorneys.  

Still, my clients always appreciated that I could share some knowledge and guidance in this arena.  So would tell them what I think I know, with the clear disclosure that this is not legal or tax advice... and may change based on their situation or new rules....

FYI:

Secured debt such as a mortgage is never discharged in a Bankruptcy, but a deficiency that is converted to a personal note to allow a short sale can be discharged if the bankruptcy is filed after the short sale is concluded.

It used to be that EVERY short sale would result in a 1099 of taxable income that would be issued to a seller.  Forgiven debt is the same as income according to the IRS, and banking law says that any bank that forgives debt must issue that 1099.  However, it was also tax law that insolvent taxpayers could get a waiver on such income and not pay taxes on it.  Bankruptcy was considered ironclad proof of insolvency by the IRS.  Other circumstances are much harder to prove and the IRS was unlikely to waive the 1099 income but a good tax professional might make some headway there.

HOWEVER:  New tax laws passed recently allow sellers to avoid 1099 income from forgiven debt on mortgage default even without bankruptcy.  

You may not know that most bankruptcies in usa are filed by people who have income but not enough to pay their debts.  If they stop paying their debts for a couple weeks, they can usually pay the attorney.  

Also true, most bankruptcies are filed by people who could hang on and recover if they only had a couple thousand dollars....  

Either way, it's not the end of the world, but a credit rating will suffer more from a foreclosure than a bankruptcy.  

Finally, a foreclosure proceeding that ends in a successful sale is actually considered a redemption, removing the stain of foreclosure from a sellers credit record, even if the bank had already filed...  The bank cannot have it both ways.  They either foreclose or allow the seller to redeem their good name.  The fact that seller was late on payments will not be removed from their credit record, but the actual foreclosure will be removed if seller sells and bank approves after filing but before actually taking posession.

Around here, there is what is called a redemption period.  After the sheriff sale, for up to one year, a seller can live free in the house, and still sell.  At that point, they only have to pay off the amount bid at sheriff sale (not the original mortgage).  Sellers can actually walk away with a profit if the sheriff sale bid is lower than the original mortgage and the house sells for more than the sheriff sale bid.  Seller pays off sheriff sale buyer rather than bank in this case because the bank already gave up their claim if they completed the sheriff sale.

Forgiven debt in a short sale can follow the seller and the bank can attach a lien on a future real estate purchase by same seller if seller does not get a specific clause in the short sale called forgiveness of deficiency.

But what do I know.  I am a Realtor and not a tax advisor or lawyer.  So call a lawyer if you need one - and if in this situation, any person probably will need one of those.

You gotta love those redemption periods.  Unfortunately in Nevada, there is no redemption period so if you lose your home to foreclosure, its gone.