Pat Owens

In my neverending education on Short Sale transactions, I have learned that if there is an IRS lien on a property that is pending as a Short Sale, not only must the seller jump through hoops for the lender(s), but IRS demands an obstacle course to be run.

I currently have a short sale transaction that is approved and ready for closing and with an IRS lien showing on the title, the lender has offered only 10% to payoff this lien. As we all know, IRS liens take priority over a 1st lien mortgage, therefore it must be satisfied by the sale.

Not so fast! There is a way around this. But to get from Point A to Point B, one must run an obstacle course designed only for those NOT FAINT OF HEART. The good news is it might work, the bad news, after submission of another package to IRS, they could ask for more information and the first process takes up to 30 days.

With a pending foreclosure date looming, I have asked for an extension from the lender so that we can meet the demands of IRS, so even if we are able to get IRS to forgive and forget, we might lose the sale anyway. Hopefully, in this case, Wells Fargo will work with us.

IRS Publication 783 explains it all and if you are a CPA or a Tax Attorney you can probably interpret this language, however, if you chose not to pursue one of these time honored professions, you are probably going to hire one just to tell you what IRS will accept to meet their regulations.

One of the requirements is "to furnish an estimate of the fair market value of the property" which means "two written appraisals by two disinterested persons qualified to appraise the property, and a brief statement of each appraiser's qualification." So on top of everything the seller is battling, we might have to order and pay for two appraisals that will support our sales price.

At this point, all of us are heavily vested in this transaction and I am determined to get it closed. The seller deserves it and the buyer has patiently waited in the wings.

IRS--here I come with lots of new paperwork for you to review and pray that time is on our side.

I am currently working with a couple who is selling their home as a short sale and there is a sizable IRS lien on the property.

We have approval on the deal and have about 30 days to get it closed, subject to the IRS lien accepting about 10% of what is owed. The homeowner is frustrated because all he ever gets at IRS is a recording and has not been able to talk to anyone.

I decided to little research of my own and learned that this situation is not new to the IRS and they actually have created a form and a process to accelerate the sale or refinance of a property in this situation.

For more information on this subject, visit IRS. The link to this subject is:

http://www.irs.gov/newsroom/article/0,,id=201343,00.html

I was talking to my daughter who lives in a neighboring city yesterday and she and her husband have outgrown their first home and after adding three children and one rather large dog, it's time to upgrade. They have done a bit of painting and reflooring since moving in, but let's face it, it is an older home--probably built in the 1960's, and it could definitely use a redo.

The reason for her call was a request that her father and I keep the children next week while on spring break so she and hubby could do some work on the house to get it ready for sale. She said they couldn't decide whether to clean the satillo tile floor--which covers a good deal of the house, or to remove the original wallpaper and repaint the master bedroom and bathroom. As a agent, I said the more important item would be to paint. The floors should probably be done by professionals. Grout is a tricky item to clean and usually requires chemicals and the know how to use them. (I have learned not to give advice to this daughter of mine, as she has a mind of her own and is very sharp. I have tried before to suggest things to do to the house for resale and have always been rebuffed. Every house I have owned I have always done redecorating and remodeling, keeping in mind resale.)

As the conversation continued, I told her that with all the houses I have remodeled (and it seems it was every one I've owned to date) it always seemed to be at the end of the occupation, not the beginning, and I did not have sufficient time to enjoy my vision. So my advice to her was get the work done after you move in, not when you are about to sell it. If you think about it, if you did the work early in the process, you probably wouldn't have to work so hard at the end. As they say, hindsight is always best.

So two good things come out of the conversation--we get the kids for three days next week (ages 9, 6 and 2) and she and hubby get several days alone and time to do a much needed project.

FORECLOSURES-FHA OFFERS A GREAT OPPORTUNITY FOR REAL ESTATE BUYERS

It had been a while since I had really been to an FHA (Federal Housing Administration oversees the housing program for the HUD-Department of Housing and Urban Development) training session and since we all need to revisit areas of expertise, recently, I took a class on HUD foreclosures, aka "repos."

Two of my company's associates joined me for the training session-so did 147 other real estate agents in the North Dallas area. This is BIG BUSINESS and the main purpose of this training was for the real estate community to show and sell more foreclosures.

HUD's foreclosure rate is up considerably, therefore there are quite a few houses on the market that the government is selling. Anyone can buy a HUD foreclosure-those who want to live in the property, commonly known as OWNER OCCUPIED, as well as those that want to purchase for purposes of investment-known as INVESTORS.

A good number of those that qualify for FHA mortgage loan financing require some repair. The amount of the repair is estimated prior to the property being put on the market and that amount of money (up to $5,000) plus a 10% overage is required to be put aside by the borrower at the time of closing in order to complete said repairs. If the repair cost estimate is more than $5,000, the property is not eligible for FHA mortgage loan financing, but can be purchased with other types of financing.

Investors typically use "hard" money where the loan amount is based on the "after repaired" value. Hard money is expensive and short term.

Owner occupied buyers can use conventional financing that will allow for some repairs to either be escrowed or do a two step loan, which allows the buyer to repair the property after closing and include a portion of the repairs in the loan. These loans require extremely good credit and a low Loan to Value ratio, plus they are not as plentiful as before the sub-prime crisis.

HUD foreclosures typically sell very quickly-usually with 10-20 days, so if you find one, you need to be prepared to act quickly.

To buy a HUD foreclosure, you should first contact a Loan Officer from a reputable lender who can pre-qualify and pre-approve you for your upcoming loan. The Loan Officer can also tell you what you can do to qualify for a home loan. Their services are usually complimentary as they want your business. With your blueprint in mind, you can work toward your first home. If you don't know any lenders in the area, call me as I know some great people who will work hard to earn your business-Pat @ 469-231-8744.

An FHA loan requires proof of funds for closing and verification of income.

Your next step is to call a Realtor (preferably me!) to help you determine which area of town works for you and some of the basics you are seeking in a new home-number of bedrooms, bath, school district, etc. When you write an offer-it's actually a bid with a HUD house, so you are bidding against other buyers. Don't be discouraged if you do not win the first bid. HUD is looking for the best offer which offers the highest return on their money.

With your bid, you will be required to have certified funds for the earnest money-if the property is appraised at or below $50,000, the earnest money amount is $500 and above $50,000 is $1,000.

So now that you know just a little bit more about buying a HUD home, get prepared by calling me and getting pre-approved for your loan.

You can reach me at 469-231-8744 or at Pat@PatOwensRealty.com.

NEW GOVERNMENT INCENTIVES FOR SHORT SALES

Recently, I heard of this program for the government to pay incentives to the seller and the servicing agent of the loan upon the closing and funding of a short sale.

A short sale is when a property is sold to an arms-length third party and the investor (the company who owns the loan) agrees to accept a sales price that is less than the amount owed on the property.

Previously, investors appeared to not seem too interested in pursuing short sales. The negotiators for the investors were mysterious behind-the-scene individuals who seemed to drag their feet at every turn and make it appear that the deal would never close. Most real estate agents avoided short sales because of the extra work and headache. The last two deals I have worked on have gone pretty smoothly. It may be because I was in the mortgage business for 30+ years and am comfortable dealing with lenders and it could be because I am laid back and non-confrontational, but understand the internal workings of a large mortgage company. It works well when patience is one's best virtue.

One of the deals I am currently working is in the final stages and down to the final bits of negotiation. The investor has just informed me that the seller will receive a check in the amount of $1,500 after closing. The check is to facilitate relocation. The servicing agent for the loan (usually the company to whom you make your monthly payments) also receives $1,000 for their participation in the short sale. The only party that may lose out is a second lien holder as they are offered only up to $3,000 for their lien and nothing for their participation.

My advice to anyone who is struggling to make their mortgage payment is to first contact your lender and request a modification agreement. A modification agreement modifies the original terms of the note. Normally, the rate is lowered. I must caution however, the borrower must be able to qualify for the new loan. So if you have lost your job and do not have a verifiable source of income, a modification will probably not work for you. The same with a refinance-the borrower must be able to qualify for the new payment.

When you realize you are in trouble, do not waste valuable time dragging your feet. Talk to a Realtor about a possible short sale. Their advice should include contacting a lender about a modification or a refinance of the property.

Not everyone qualifies for a short sale. A job loss, medical issues or some other situation not under your control usually meets muster. A property whose value has been lost is simply not enough to qualify for a short sale. In addition, a short sale affects your ability to buy another home for only 3 years, whereas a foreclosure stay with you on your credit report for many more years.

Work with a Realtor, preferably one who is experienced working short sales. A Realtor can answer your questions and give you peace of mind during a difficult period.

Visit my website at www.PatOwensRealty.com for more information on short sales.