Jack Gross

It is getting dicey-
Banks are playing hardball with short sale approval letter language
and it is happening an alarming rate. You need to be informed as to
what is happening if you are assisting homeowners with short sales.

There seemed to be a time when you could successfully argue for
full satisfaction of the mortgage with short sale lenders. We are
beginning to see more approvals using the word "discharge", or
"lien release". You may remember from my course or by studying
this industry that a lien release is nothing more than removing the
encumbrance from the property so that the property can be sold with
free and clear title. That does not release the homeowner from
responsibility for the shortfall. The Mortgage Debt Forgiveness Act
does not apply here.

To clear up some confusion regarding the Mortgage Debt Forgiveness Act
(extended to 2012), some verbiage from the IRS website is below.
This legislation only allows the remaining debt or shortfall to be forgiven
as it relates to taxable income, meaning that the shortfall on a debt cannot
be taxed as it has in the past.

From the IRS.gov Website...
If you owe a debt to someone else and they cancel or forgive that debt,
the canceled amount may be taxable. The Mortgage Debt Relief Act of
2007 generally allows taxpayers to exclude income from the discharge of
debt on their principal residence. Debt reduced through mortgage restructuring,
as well as mortgage debt forgiven in connection with a foreclosure,
qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012.
Up to $2 million of forgiven debt is eligible for this exclusion
($1 million if married filing separately). The exclusion does not apply if the
discharge is due to services performed for the lender or any other reason not
directly related to a decline in the home's value or the taxpayer's financial condition.

So, what this means is that a homeowner is covered by the debt relief act by
not having to pay income on the forgiven debt, but that DOES NOT mean that
banks aren't going after some version of recovery of the debt.

There are several ways they are doing this now. Sometimes it is in the form
of a promissory note, only to be requested at the end of a of a long, laborious
short sale process. If you are an investor, or are a realtor working with an
investor, getting the investor to increase the offer slightly-if there is enough
margin, can make the lender back off on the promissory note. Investors who
can and will do this are a HUGE help to the homeowner here.

Lenders are also going after the homeowner by putting them into collections
for the shortfall. It is a pretty rotten thing to do after the short sale process,
but it is happening.

So, how do you protect yourself and your homeowner.....
DISCLOSURE!!! AND REFERRAL!!

What we know at this point is that it is still better to conduct a short sale
than to let a homeowner go to foreclosure--otherwise, they may be responsible
for the entire debt, vs. just the short. However, if you don't fully disclose to
the homeowner what the ramifications are of conducting this transaction,
you really risk litigation yourself.

Make sure your "Seller's Understanding, Waiver and Disclosure Form" is up
to date with the potential risks of a short sale.

Also make sure you have a good R.E. attorney, bankruptcy attorney and
accountant on your team for REFERRAL should you/your homeowner be
faced with these issues. Many homeowners who conduct a short sale, and
still have outstanding debt, do file bankruptcy after a short sale is completed.
This is something you may be asked about, but do make sure to refer and
not offer legal advice.

To learn more about protecting yourself and the homeowner, along with
insider tips, tricks and opportunities conducting short sales, visit:
www.ShortSaleGalaxy.com

Patty Burgess
www.ShortSaleGalaxy.com

Bringing the Dream of Homeowneship Within Reach As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.

How does the 2009 First-Time Home Buyer Tax Credit help prospective home buyers become part of the American dream?

Q. Who Qualifies?

A. First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009. To qualify as a "first-time home buyer" the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Q. Which Properties Are Eligible?

A. The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

Q. How Much Will the Credit Be?

A. The maximum allowable credit for home buyers is $8,000. Each home buyer's tax credit is determined by two factors: The price of the home-the credit is equal to 10% of the purchase price of the home, up to $8,000. The buyer's income-single buyers with incomes up to $75,000 and married couples with incomes up to $150,000-may receive the maximum tax credit.

Q. If the Buyer(s)' Income Exceeds These Limits, Can He/She Still Get a Credit?

A. Yes, some buyers may still be eligible for the credit. The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income-over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Q. Will the Tax Credit Need to Be Repaid?

A. No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Well from listening to several buyer agents and many of our own if anything comes out of this foreclosure, short sale boom for the real estate industry maybe it will have something to do with a standardized system for dealing with short sales.

I have heard and experienced many nightmares for agents but more importantly buyers who actually do want to buy but are unable to do or just don't understand the process when making an offer on a property which is tagged with "short sale" or "bank approval required" as a label in mls. I don't blame them, many times I don't understand the process either.

For the most part many banks have similar needs and requirements for instance the need for the property owners participation and cooperation as well as hardship letters and other explanations. I think where the majority of the problems exist is the time frames 2-3 month approvals for an offer really aren't right and if the answer is no and the buyers rate lock expires is that at all fair!

My favorite short sale stories are the ones where I have watched our agents do very detailed due diligence and go over and above the call of duty to help the seller out of a jamb. I have had agents who have prepared masterful and detailed cma's that not only detail the property, neighborhood trends but the entire market area with numerous comps, photos, graphs and blood types of the family. In an attempt to send in the most complete short sale package as possible (knowing that one minor mistake will cost weeks) they have over documented their case, sent in all of the property owners documents, financial info, hardship letters and other proof of the clients desire to cooperate and plead for assistance. They have checked their details twice had others review the same and received written confirmation from the short selling lender that all was in order.

Guess what.... two weeks our agent is told NO to the short sale because the lender received a $50 drive by saying the property was worth more than what the seller owes and a short sale is not necessary. Why... because the agent doing the drive by had visions of a listing! Doesn't matter that the lender has our agents cma which is far better than the ten minute drive by. Doesn't matter that the seller previous had the property on the market for nine months at a lower than drive by price and it didn't sell.

This is just one of many I am speaking of but my favorites are when there has been a buyer patiently waiting for the answer. I have many other stories that have arisen from this market and these conditions but it always amazes me how foolish institutions can be. No wonder!!

Our government let me down again. I actually had high hopes for them a few weeks ago when I heard rumors that they were actually thinking of a home buying credit of $15,000 for everyone who purchased a home this year. When I heard that I thought WOW thats incredible and will get us out of this mess much faster or at the very least get all of those buyers who are on the fence off the fence and into a new home.

Here is why I liked it. I heard one time (couldn't tell you where or when) that when someone buys a home it puts $25,000 on average back into the economy and circulation. How..... simple.... you buy a home what is the first few things you do, paint it, new furniture, new wall hangings, new improvements and so forth, all of these things that you buy provides a sale for someone else, provides income for a company that provides jobs. Its not that creative really, its quite simple. I am not sure if my numbers are accurate but it makes real good sense to me.

I will give them some credit, they are trying. But once again its politics as usual and they are more worried about looking righteous and re-election than getting the job done and making the hard decisions that us self employed people must make every day. For example, back before Christmas we all heard rumblings of a possible government backed interest rate of 4%, sounds wonderful right? What did those rumblings do for us on the front line, it put our buyers higher on the fence, why should they come down and buy a home with a 5% or better interest rate when all they have to do is wait until spring and get a government backed rate of 4%. It didn't happen... don't get me wrong, I don't want it to happen as the government should not be in the direct lending business but the mere mention of it hurt us front line guys who are trying to fight what our government honestly helped create through too much deregulation.

Now our government has cut the home buying credit in half and limited it to first time home buyers only. Thats great and will help some but not nearly enough and with little impact. Who is it that we want to spend money?...... the people with the money! Do first time home buyers in todays world typically have money after they purchase?? Few of them have money BEFORE they purchase!!

I love this country, what it stands for and what is was founded upon. Politics was never intended to be a career opportunity, it was meant to be a temporary service to ones community or country with a return to private life after one or two terms. Until we get back to that we are destined for politics as usual.

Jack Gross, Cassidon Realty, Bethlehem Pa jack@cassidonrealty.com

My boys Elias and Caleb and I are at indoor baseball practice at the Lehigh Valley Baseball Academy. This is a trip we take every week at least 2-3 times throughout the winter. In fact, I have driven the same way so many times it almost a brainless act that does not require much thinking. Yesterday and today were different.

We travel down Airport Road to get to Union Blvd just past the Lehigh Valley International Airport. There is a lot of construction going on because of a new high end mall going in near the intersection of Airport Road and Route 22. Yes.... there is a NEW mall being constructed in the midst of these horrible financial time, but I digress and don't want to steal the thunder from CNN or MSNBC.

Anyway, as we are going down the road there is a small (economicall efficiant and I am sure environmentally sound) car in front of me that is weaving horribly across the white lines of this two lane section of road. This is not good as the road is very torn up and the lines are out of wack and difficult to navigate even in good weather. As we started to gain on this car I had to slow to a crawl. My boys and I were trying to see if the driver was hurt or suffering from some ailment (I figured the driver was drunk) so I came as close as I could without impeeding or getting in the way. This went on for about a mile and the driver continued weaving and driving 15 miles under the limit.

We were approachingthe stop light at Catasauqua Road and 22 and I thought for sure the driver in front would go right through the red light and cause an accident. I was surprised when the car brakes light then went on and the the car actually chose a lane. The car then stopped at the light so I pulled into the lane next to it to see if everything was ok. When I stopped and rolled my window down and looked over into the car I was furious to see that the driver was not an elderly person who might be ill or suffering, it was a young lady who was texting!!! This was the 2nd time in two days I could have been run off the road with my kids in the car because someone was more interested in their texting than watching the road!

What is wrong with people! Ask my friends and they will tell you that I am about as techie as you can get for a Realtor, I love technology and all of the wonderful things it has done for me, my business and society in general. I will use technology at any level I can to make my job easier, run our business more efficiently, market our listings more effectively and thousande or other things. We need to remember though that technology will never replace common sense.