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Understanding California Short Sale Rules

We are hearing more and more about the realities of short sales. Making the latest headlines are the concerns addressing the changing California short sale rules. Short sales options by California property owners represent about twenty percent of that regions housing inventory.

In general, a short sale is when a property owner has fallen several months behind in their payments on that property, and there is a new agreement made between the lender and that property owner, to settle the property for less than is owed. The remaining balance is pardoned by the lender, so that both parties can move forward from this irreconcilable relationship. But is it a true move forward?

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California short sale rules implies that the seller will still be ultimately responsible for the difference left between the money owed on the property and the new purchase price agreed to the new owner. This will still remain a problem for the original owner, after suffering through the lengthy, stomach wrenching ordeal, of the entire process.

The California Association of Realtors are franticly warning realtors that California property owners may be in danger of severe tax consequences if they decide to chose short sale over foreclosure, even if the lender agrees to allow the short sale to proceed after several road blocks, and so forth. The lender can still be instrumental in pursuing judgment against the previous property owner.

While the California short sale rules are still not clear, the possibility for government involvement to pursue wage garnishments for property owners believing that a short sale was their way of putting a bad experience behind them is very real. It is till being debated and reviewed in congress, but a solid decision is not coming fast enough.

Some say that it may be smarter to take the credit hit now and let the foreclosure happen versus try and save those few credit points, and still be subject to the ultimate financial ruin anyway. Either way, there will be some credit damage. Your final decision must be something that you are willing to live with long term. No easy solution, but there is a way to make the best choice for your particular situation.

For Californians, there are several non profit foreclosure counseling organizations, as well as some reliable real estate lawyers available that can help interpret the current California short sale rules for you and help you decide the best course of action to take. Be sure to make a check list. Strategy and planning will also aid you in being able to live with your final decision.

When reviewing the California short sale rules with your counselor, ask if it there is a possibility of owing the California Tax Board as well, as the IRS. You may want to bring up capital gains as well as if there are other work out plans in addition to the ones you may have to create a hybrid plan, and if so what are the long term effects on your credit?

Article Source: http://www.articlesnatch.com

About the Author:
California Short Sale Rules…what rules? Visit http://www.nphsrealestate.org/Short-sale/California now, to get all the rules and facts on Short Sales in your area.

Good News For Homeowner Short Sales

The Home Affordable Foreclosure Alternative Program (HAFA) has not met up to its expectations with regard to providing a viable alternative to a full blown foreclosure for distressed homeowners wanting to sell properties that are underwater rather than have a foreclosure on their record.

The HAFA program’s intent from the inception was intended to allow a homeowner facing foreclosure to short sale the property and also provide the possibility of a stipend of money for relocation purposes, once the is was complete. It also provides for monetary incentives for the servicers to administer the program to help facilitate short sales.

Unfortunately, the program also created loopholes for servicers to take advantage of the guidelines to make them work primarily in favor of the the servicer, representing the investor, to the disadvantage of the homeower. Some of the loop holes in the orginal HAFA program that made for sometimes insurmountable obstacles are:

(a) the inordinate amount of time it takes for servicers to respond to a borrower when electing to short sale a property and the fact that approval or disapproval of short sales, commonly take 90 or more days. During this time, most buyers who have made an offer on the property are discouraged and lose interest and move on. Thus, the homeowner loses the short sale opportunity. This results in the homeowner often needlessly being forced in to foreclosure and thus defeating the intent and purpose of the HAFA program.

(b) HAFA presently has no guidelines addressing the practice of servicers to completely ignore the underlying property listing agreement between the homeowner as seller and the prospective buyer of the property. Servicers more often than not unilaterally dictate the amount of commission that will be paid to the listing real estate broker. Most listing contracts have a six percent (6%) commission set for payment to the listing real estate broker.

This commission is the thing that motivates the real estate broker to list the property and work very hard to accomplish a sale on a very difficult property. Arbitrarily reducing the commission by servicers because they must approve the sale, often occurs and this knowledge has discouraged the real estate industry from embracing the concept of short sales and thus affects the entire real estate industry in a significant way.

The two obstacles described above account for a significant failure of short sales that otherwise could be successful and benefit the servicer, the homeowner and the real estate industry, which desperately is trying to right itself.

Finally there are new HAFA guidelines proposed that will take place effective February 1, 2011 that removes the obstacles described above along with several others. Here are some of the most important changes that will become effective:

1. No more need to verify income. Only a hardship letter or request for modification via short sale is required.

2. The property being short sold can be vacant or rented out up to 12 months prior to requesting the short sale without regard to whether the borrower has lived in the property so long as it was the borrower’s principle place of residence within last 12 months.

3. Servicers are no longer limited to the 6% cap on extinguishing second, third or other subordinated loans during the short sale process.

4. Servicers are required to respond within 30 days to a borrower’s request for a short sale. Servicers are required to approve or disapprove an offer submitted by a buyer of the property within 30 days of receipt or alternatively to respond with a counteroffer within that 30 day period of time.

5. Servicers must honor the amount of commissions agreed to be paid to the listing real estate broker up to six percent (6%) if that is what is agreed to between the listing broker and the borrower. No offset is allowed by the servicer. This is huge toward getting the real estate sales industry to engage more actively in short sales.

While one should be optimistic and excited about these new guidelines, the reality is that many of the servicers will not take heed and will continue their ways in ignoring rules and regulations. Therefore, it will be necessary for all parties involved in these short sales to be diligent and hold the servicer’s feet to the fire. The difference this time around is that the regulations specifically include language like “the servicer “must” or “shall” follow specific guidelines.These terms “must” and “shall”, although small, make all the difference. The effect is that the guidelines now have muscle that the courts will ultimately enforce under federal regulations and this message is now loud and clear to the servicers.

Real estate brokers, homeowners and others who understand the power of this new “language” change and who let the servicers know that they know the significance will meet with substantial success in the future. Homeowners and persons representing them should keep a copy of the Supplemental HAFA regulations handy when communicating with lender servicer negotiators.

Article Source: http://www.articlesnatch.com

About the Author:
Roy Landers is a California attorney/real estate broker with over 25 years experience in real estate matters.He maintains two real estate blogs at http://www.therealestateinstitute.net, a real estate education site and http://www.renegadeforeclosurefighter.A FREE Newsletter-The Real Estate Playbook is also available at these sites.

California Short Sale Laws Needed To End Foreclosures

California Short Sale Laws are changing a lot of people’s perceptions on foreclosures. California was known as the state with the largest number of foreclosures due to the economic recession. The recession was taking everything it could from its residents.

The worse thing to ever have ripped from your hands is your home. Your home is what you utilize as a means to raise your family; it is your private getaway from the world and all its corrupt ways. However, for many people that is the first thing that has been going in these financially difficult times.

People are getting thrown out of their homes because of unemployment, or lay offs at their jobs. Many people are being forced to take jobs that pay them substantially less, just so they can put food on their family’s tables. Well, California’s great Governor Arnold Schwarzenegger, has heard the cries of his people, and sees people’s lives as well as the states livelihood turning upside down, because of the current recession.

For this matter alone, the Governor was more then obliged to sign the Short Sale Law Bill. This bill gives people who are facing hard times due to the economy to be able to negotiate prices with their mortgage carriers to get some of the amount that they may owe on their homes knocked off completely.

This means their overall mortgage payment every month will be substantially lower, and this will stop a big majority of foreclosures from occurring. Something had to be done to help the great people of California and this relief could not come soon enough with over 833, 000 homes being foreclosed on, the economy of California was suffering a winding streak downhill.

During a foreclosure banks and or mortgage companies normally take over the homes. This leaves some of the homes empty for an elongated period of time. Which leaves the doors open for drug activity and violence to go on around those homes that are empty.

Short sales, allow the right people to keep their homes. We definitely needed something to stop the all powerful banks from taking money from us. The Stimulus package that the banks received should be enough for them to suffice, they don’t need to collect more money from the less fortunate as a means to feed their hungry mouths.

The short sale laws, gives everyone the right that is going through financial hardship the ability to speak with their mortgage institute and work out an arrangement that will suit them during these times. One big downfall to the short sale is the fact that all the money that you save, has to be listed on a 1099 at the end of the year to be filed as an income.

Filing your short sale as income is kind of seen to be a ridiculous thing to have to do. But, when you take any money away from some of the richest corporations in the world they won’t stop until they see some of that money back. So in the end, you still have to pay all taxes for the value of your home, even with doing a short sale.

Article Source: http://www.articlesnatch.com

About the Author:
California Short Sale Laws– stopping foreclosure dead in its tracks. Get the latest inside info on http://www.nphsrealestate.org/short-sale/law-tax

Does Moving Up Make Sense ?

These questions will help you decide whether you re ready for a home that s larger or in a more desirable location. If you answer yes to most of the questions, it s a sign that you may be ready to move.

1. Have you built substantial equity in your current home Look at your annual mortgage statement or call your lender to find out. Usually, you don t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you ve owned your home for five or more years, you may have significant, unrealized gains.

2. Has your income or financial situation improved If you re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.

3. Have you outgrown your neighborhood The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good. For example, you may have realized that you d like to be closer to your job or live in a better school district.

4. Are there reasons why you can t remodel or add on Sometimes you can create a bigger home by adding a new room or building up. But if your property isn t large enough, your municipality doesn t allow it, or you re simply not interested in remodeling, then moving to a bigger home may be your best option.

5. Are you comfortable moving in the current housing market If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you ll have more selection and better pricing as you seek your new home.

6. Are interest rates attractive A low rate not only helps you buy a larger home, but also makes it easier to find a buyer.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Seven Selling Mistakes You Don’T Want To Make!


Mistake #1 — Pricing Your Property Too High

Every seller obviously wants to get the most money for his or her product. Ironically, the best way to do this is NOT to list your product at an excessively high price! A high listing price will cause some prospective buyers to lose interest before even seeing your property. Also, it may lead other buyers to expect more than what you have to offer. As a result, overpriced properties tend to take an unusually long time to sell, and they end up being sold at a lower price.

Mistake #2 — Mistaking Re-finance Appraisals for the Market Value

Unfortunately, a re-finance appraisal may have been stated at an untruthfully high price. Often, lenders estimate the value of your property to be higher than it actually is in order to encourage re-financing. The market value of your home could actually be lower.

Your best bet is to ask your REALTOR® for the most recent information regarding property sales in your community. This will give you an up-to-date and factually accurate estimate of your property value.

Mistake #3 — Forgetting to “Showcase Your Home”

In spite of how frequently this mistake is addressed and how simple it is to avoid, its prevalence is still widespread. When attempting to sell your home to prospective buyers, do not forget to make your home look as pleasant as possible. Make necessary repairs. Clean. Make sure everything functions and looks presentable. A poorly kept home in need of repairs will surely lower the selling price of your property and will even turn away some buyers.

Mistake #4 — Trying to “Hard Sell” While Showing

Buying a house is always an emotional and difficult decision. As a result, you should try to allow prospective buyers to comfortably examine your property. Don’t try haggling or forcefully selling.

Instead, be friendly and hospitable. A good idea would be to point out any subtle amenities and be receptive to questions.

Mistake #5 — Trying to Sell to “Looky-Loos”

A prospective buyer who shows interest because of a “for sale” sign he saw may not really be interested in your property. Often buyers who do not come through a REALTOR® are a good 6-9 months away from buying, and they are more interested in seeing what is out there than in actually making a purchase. They may still have to sell their house, or may not be able to afford a house yet. They may still even be unsure as to whether or not they want to relocate.

Your REALTOR® should be able to distinguish realistic potential buyers from mere lookers. REALTOR®s should usually find out a prospective buyer’s savings, credit rating, and purchasing power in general. If your REALTOR® fails to find out this pertinent information, you should do some investigating and questioning on your own. This will help you avoid wasting valuable time marketing towards the wrong people. If you have to do this work yourself, consider finding a new REALTOR®.

Mistake #6 — Not Knowing Your Rights & Responsibilities

It is extremely important that you are well-informed of the details in your real estate contract. Real estate contracts are legally binding documents, and they can often be complex and confusing.

Not being aware of the terms in your contract could cost you thousands for repairs and inspections. Know what you are responsible for before signing the contract. Can the property be sold “as is”? How will deed restrictions and local zoning laws affect your transaction? Not knowing the answers to these kinds of questions could end up costing you a considerable amount of money.

Mistake #7 — Limiting the Marketing and Advertising of the Property

Your REALTOR® should employ a wide variety of marketing techniques. Your REALTOR® should also be committed to selling your property; he or she should be available for every phone call from a prospective buyer. Most calls are received, and open houses are scheduled, during business hours, so make sure that your REALTOR® is working on selling your home during these hours. Chances are that you have a job, too, so you may not be able to get in touch with many potential buyers.

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