Betty asks…
CHASE -short sale (investment property)– will they take my house?
I live in a house in California (worth over 500k). Years ago I purchased a condo in Phoenix Arizona for investment real estate (have a 132k loan on it). It is now worth about 45k.
I just retired in June as a teacher and do get about 4k coming in a month. I have been sick for the last few months and thought when I retired I would get an easier job, but I can only work at home right now.
No credit card debt, but I NEED to get rid of the Arizona real estate (tenant lease is almost up/not paying, lots of problems). I am negative each month with that place.
I need help! If I did a short sale could the bank come after me and take my HOUSE? I have two separate loans, but both are with CHASE. I tried to do a short sale years ago, but I was “not qualified” because I was working and making too much money.
Need some advice, please.
Ron Wilczek answers:
Mary asks…
Upside down by about 50K on my current home in California and want to buy a new home in Arizona (new job).?
Potential well paying job in Phoenix area has me considering moving to AZ from CA. From what I’ve seen, I could easily afford a nice home in the Phoenix area with the new salary. My dilemma is what to do with my existing California home?
I have a fixed 6.25 interest rate and put 20% down a little over a year ago on my current CA house. Even with that – I’m around 50K upside down.
Do I buy a new home in Phoenix (will I get a good interest rate?) and try to rent my CA house out? If it doesn’t rent, do I short sale? If no short sale then what?????? If I walk away (which I do not want to do) from my CA house after buying the new Phoenix house what can happen?
Any info is appreciated. Thank you.
Ron Wilczek answers:
That question may depend on whether or not you want to save your credit. Doing a short sale or going to a foreclosure will definitely ruin your credit. Rent out the house If you do not want to ruin your credit. Use an agent to help rent and manage it if you’re worried about being far away. The housing market will eventually get better. You can think about selling it then, or you might find that you enjoy being a landlord and decide to hold on to it. The are many benefits to keeping it if you can.
Lending requirements have gotten much tougher. The only way you would be able to buy a house in Phoenix while renting out your California home is if you could afford to make payments on both homes. Mortgage lenders have gotten very tough on what is now known in the industry as “buy and bail.” Read more about “Buy and Bail” in a post from 2 years ago.
James asks…
What are the tax implications of taking a lender-approved loss on my home?
We recently moved for family and employment reasons from Phoenix, AZ, to San Antonio, TX. We have only owned our home in Phoenix for two years, and in that time, it’s value has decreased by at least $80k. We have been offered the option of a “short sale” by our lender, but I don’t know what the tax implications of that are. What would we end up paying in taxes if we had a “debt forgiveness” of $50k from our lender?
Ron Wilczek answers:
James - any advice we give always begins with “Consult with your real estate attorney or tax accountant.” Lenders will generally issue a 1099 for the amount of the debt forgiveness. The real question is whether or not you would be obligated to pay taxes on that amount? That’s where we would again advise you to consult with your real estate attorney or tax accountant. Although there have been many cases ( in the early days of short sales) when a seller has not received a 1099, these days you can pretty much count on it.
There is at least one loophole and there could be more. The one I’m aware of concerns insolvency. In other words, if you are insolvent in the year you completed your short sale you probably won’t need to pay any tax on the amount of the debt forgiveness. Insolvency generally means that you have more debt than assets.
Lizzie asks…
Buying a home in phoenix?
I want to purchase a home within the next couple of months with CASH. I can’t obtain a loan so I decided to just save up the $$. My questions are..
How are the taxes worked out when you buy with cash? Do you pay for the taxes on the property up front when you buy the home? Example: home price $50,000 taxes $5,000 would I need have $55,000 or are the taxes paid later?
Second question if a home is listed for $50,000 can I make an offer lower than this amount? Say like $45,000?
Third, how long do short sales take typically with a cash offer?
Fourth, if the site has the home listed for a certain amount is this the amount the bank had countered on a different offer & will accept or is this just an amount the listing agent is just throwing out there to attract buyers?
I want to know these things before hiring a realtor.. I don’t want to waste anyone’s time with buying a home if i don’t quite have all of my ducks in a row : )
Thank you!
Ron Wilczek answers:
- If you are buying a property with cash you will not have what is known as an escrow account. Escrow accounts are established when you buy a house with a mortgage. Each month you pay 1/12 of the taxes and insurance into the escrow account and the lender pays the annual taxes and insurance on your behalf. Since you are buying with cash you will be responsible for paying the taxes on your own. Generally speaking you will pay a portion of these taxes at the time you buy the house. Going forward you will be responsible for making bi-annual payments to the County.
- Yes, you can always offer less than the house. The seller has 3 options: accept your offer, counter your offer, or reject your offer. If they reject your offer you can always make another offer.
- Cash doesn’t necessarily make a short sale go any faster. The biggest factor in the speed of the short sale is the work load and efficiency of the lender’s employees. It can also depend on some other factors such as: the investor on the loan, or whether or not a mortgage insurance company is involved.
- Generally speaking the listing price is set by the owner and the listing agent. In cases where the short sale has been active for quite some time the listing agent may have already determined the amount the lender will accept. In those cases the listing agent will probably set the listing price to the lender approved price.
Steven asks…
I have to foreclose on my home. Advice and steps involved?
My wife and I own a townhouse in Orlando, FL. My job in Orlando was ending due to the recession and the job outlook looked grim. I took a job in Phoenix, AZ while my wife quit her job and is having some trouble finding one in Phoenix. We have a professional leasing company find tenants for our town house while we rented a condo in Phoenix. Since my wife isn’t working, we are having difficulties paying our rent plus part of the mortgage (the rent doesn’t cover all of the mortgage plus our HOA fees each month). We thought about a short sale, but then was told that since we are not the primary residents in our townhouse, then a short sale wasn’t an option, which leads us to foreclosure. I don’t really want to do it, but I have lost over 100k in our home in the last 2 years and it’s financially draining on us. What are the steps in foreclosing a home? Do we just stop making payments? Do we advise our lending company first? I always hear of people just walking away from there homes, but there is got to be more to it than that. Any advice would be great.
Thanks.
Ron Wilczek answers:
Susan asks…
First home with VA home loan, getting a little confused on things help?!?
We have been pre-approved for a VA home loan. Now I am house hunting and I’m wondering how much of a pain a foreclosure or short sale is going to be with VA. I know VA has their stipulations on closing costs, and condition of the house. Then I’m seeing lots of foreclosures/short sales that have a list of things that often contradict the VA such as they will not repair anything, which is VA required. Are banks often flexible changing some of these things? Or am I better off avoiding short sale/foreclosures since they tend to drag out longer and probably will conflict with VA requirements?
I do not have a realtor yet, I’m taking a trip this weekend to look at some places. We are moving from San Diego to the Phoenix area. I just wanted a better idea what I’m getting into here.
Ron Wilczek answers:
Susan, those are very good questions. I would recommend you check with the mortgage officer handling your VA loan. Your loan officer will have the most up to date and complete information regarding your loan requirements. Generally speaking, VA loans do require the house to be in a livable and reasonable condition. If the VA requires repairs to the house and the sellers won’t complete them your loan won’t be approved. Again, check with your mortgage officer for current loan program requirements. VA does have some special provisions that apply to construction, alteration, improvement, and repair of homes.
There is a nice product with FHA loans called the FHA 203K rehabilitation loan. The 203K allows you to finance required repairs into the mortgage. This will give you the opportunity to buy a home requiring some fixup which probably means a lower sales price.
I would recommend looking at normal sales, short sales, and foreclosures to make sure you find the home that is best for you. Again, consult with your mortgage officer to determine what you can and can’t financing to your loan. Once you are clear on the requirements you will be better prepared to decide what kind of home to pursue.
Helen asks…
Home Value Crisis, (military) What do we do?
I am hoping you can offer some help regarding our current situation. Let me preface this by saying that we are active duty military and are forced to move at other’s discretion. We bought our current home a little over a year ago in the Phoenix metro area. We were given orders to relocate and we did not want to lose money on renting a home, so we bought the cheapest house (a short-sale) we could find that would accommodate our family of 6. Now, we are facing orders to move again, soon. We purchased our home for about 200,000 and current market conditions place our current value around 35-40% less than what we owe. We have no problems making our payments, we budgeted well and did not buy beyond our means. However, what can we do? We do not have 70-80,000 to bring to the table if we sell for less than our home is worth. We are considering, when the time comes for us to move, to try a short-sale or let the property go into foreclosure. We are hoping since my name in not on the loan, only my husband’s credit will be affected and we can still purchase another home. Do you have any suggestions for individuals in this specific situation?
Just a note for some comments. Yes, we knew values were falling, that is why we thought we could get a good deal. Was it reasonable to think that the value was going to drop by 40% in one year? You may say yes, looking back now, but at the time, most average home buyers did not. As far as knowing we were not going to stay, you’re right; that’s why we put 10% down. We have always purchased homes when we relocate and either break even (boost to credit score for paid-in-full mortgage OR made money). We have exceptional credit, put 10% down, used traditional, institutional financing, and bought a home that was 20% below market value for close proximity comps at the time.
Ron Wilczek answers:
Ken asks…
Home going into foreclosure?
I have a home in Phoenix Az, I owe 160K. I talked to the bank and asked If I could give them there home back..:) They had said no, but I could try selling the house unless I have $ 3800 to bring it back to current. I have it on the market as short sale for 120K only because the bank had told me I could do that. That way they just write off the difference and close the books on that home. My question is, if I can’t sell the house before the auction date, what would happen to me once the bank figures out what the difference is between what it sold for and their loss? Would the IRS come back on me and take whatever I have to pay the difference ? Would they seize my checks? Whats the negative on my situation besides losing my home? Thanks!
Ron Wilczek answers:
Alex and anyone in the same situation please listen up:
Foreclosure Laws can be different in EVERY STATE.. Please do not rely on information from people that really don’t know much about the subject since they are likely to lead you down the wrong path at a critical time. Your best bet is to contact a real estate attorney and your tax accountant.
The lender has to approve a short sale so they will immediately know the amount of the deficiency. If the home doesn’t sell and goes to foreclosure they will also be aware of the deficiency amount. The lender has the ability to issue a 1099 of the deficiency between the mortgage amount and what they receive from the sale. A 1099 means that the deficiency will be treated income for you in the year of the sale. In other words, you could be liable to pay the tax on the amount of the deficiency. Check with your tax person, but you generally don’t have to pay any tax on the deficiency amount as long as you are insolvent in the year of your short sale or foreclosure. Insolvency means that you have more debt than assets.
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