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Posts Tagged ‘dane county title company’

The deadline for the First Time Home Buyer Tax Credit and the Long Time Home Buyer Tax credit is FAST approaching.  The deadlines are:

1.  The parties must enter into a “binding contract” on or before April 30, 2010; and

2.  The transaction must close on or before June 30, 2010.

This means you have just days or hours until Friday, April 30 2010 to enter a “binding contract.”  Lets get those offers signed!

NOTE:  The IRS has not defined “binding contract” and many parties have questioned the effect of contingencies.  For instance, short sales require bank approval.  When that approval is a contingency that has not been met prior to April 30th, is there a binding contract?  One would have a strong argument that the offer is binding (the lender is not a party and their approval is only a contingency), but it is the IRS and a court’s interpretation that will matter.  Consult an accountant and or an attorney if you or your clients have this issue.  See Our Blog Post on Short Sales and The Tax Credit.

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 Question: What are the Tax implications when a lender forgives debt in a foreclosure or short sale?

Answer: The short answer – Ask an accountant! The long answer is that the forgiven debt may or may not be taxable. Normally, debt that is forgiven or cancelled by a lender must be included as income on a tax return. But the Mortgage Forgiveness Debt Relief Act allows owners to exclude certain cancelled debt on their principal residence from income. It only applies to “qualified principal residences,” and the law expires at the end of 2012. So, if the bank forecloses or agrees to a short sale and forgives debt, and the owner lives in the home as his principle residence, the IRS suggests that the debt will likely not be taxable. For more information, go to the IRS website or IRS Publication 4681.
 

Question: Why are some banks taking so long to approve Short Sales?

Answer: Lenders are completely overwhelmed and understaffed. The foreclosure crisis struck quickly and grew at a staggering pace – too fast for lenders to keep up. There were nearly 2 MILLION foreclosure filings in the first half of 2009 alone. A large lender may have a few hundred loss mitigators. Dane County saw over 1,400 foreclosures in 2009. That is one relatively small county out of thousands nationwide. Lenders simply can’t keep up. At the same time, they can’t keep up with defaults and late payments. It is taking lenders longer than ever to deal with customers in default, start the foreclosure process, and push the foreclosures to completion.

Question: If a Realtor hires a third-party negotiator, can the Agent be held liable for that negotiator’s actions?

Answer: Probably. Third-party negotiators often charge their fee from the agent’s commission. Some go further and contract only with the agent for their services. In this case, the negotiator is essentially a sub-agent of the Realtor and the Realtor may very well be liable for the negotiator’s actions. This is a question for the Realtor’s broker or legal counsel.

Question: Are agents allowed to hold offers, if the bank hasn’t looked at them yet, and play offers against each other until the bank examines the offers?

 Answer: An agent can delay submission of an accepted offer, but doing so is not likely in the client’s best interest. By delaying submission, the Agent would be delaying initiation of the short sale process. In addition, a seller cannot accept multiple primary offers.  Only one offer can be accepted and any other offers would be in secondary position. Thus, there should be little reason to delay submission. There is some disagreement as to whether agents should submit secondary offers.  Many experienced agents suggest submitting only one offer and suggest that submitting multiple offers only slows the process.  Other agents suggest that the secondary offer, if better, improves your chances on two levels: one, it is a better offer, and it also shows sincere marketing efforts.   

Question: Short Sale are high risk, take incredible effort and long hours, often result in reduced commission, and often involve angry sellers. Why would any sane Realtor touch one of these?


 Answer:
Short Sales, Foreclosures and REOs comprise anywhere from 20-30% of the sales market in Dane County and will continue to be a large part of the market for quite some time to come. Distressed properties are hard, but they are also a fantastic opportunity.  Realtors who commit to this are having their best years ever.  Those agents are careful about which short sales they will take and avoid those that will just be impossible to close.  And they develop systems and shortcuts that make the overwhelming work manageable.  Agents can do more than survive, while truly helping sellers and buyers. The key is to stay educated, develop efficient systems, and work with a team of experts. The most important member of your team is a nimble, experienced title company, like Homestead Title.

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