For those of you that are not familiar with the term "strategic default" here it is- The decision by home owners who are currently upside down on their mortgages, that have no problem continuing to pay are just throwing up their hands and walking away from their homes. They are choosing to pay off credit cards, cars and other debt. The idea is by walking away from a home that they can not make a profit off of for the next several years, will put them in a better financial position by doing a short sale on their current home. They will then turn around and buy another home when their credit is repaired. Thus cutting their debt and their payment all at the same time.
If this becomes more popular as the option arms in 2010 and 2011 come due it will make the housing recovery slow even more. The current statistics in Minnesota is 29%of home owners are currently under water and owe more than their home is worth. I believe a home is similar to a stock in that it will go up, it will go down. The thing to remember is that the value is only an issue if you are selling at that moment. Walking away for no reason other than you don't want to pay anymore is poor judgement.
The home market is recovering but we are climbing out of a huge hole. That takes time and it doesn't just happen overnight. Hopefully this is not a new trend and just a small group of home owners that don't get it.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Sunday, March 21, 2010
So where are all the foreclosures?
That seems to be the question that is constantly being asked by agents and buyers. I would like to offer some speculation. The word on the street is everything has come to a grinding hault because of the the governments moratorium on foreclosures. Now that the moratorium has been lifted, its back to business. The idea that the so called "tidal wave" would hit last November was a bit over done. In reality it makes sense when looking at the time line, the "tidal wave" may still be on its way but not until the 3rd quarter of this year.
Looking at the time line this is what I see. The moratorium ended last November and at that point the banks were still behind working on the loan modifications. Now that many are not working out the foreclosure process has started. As that increases so does the demand for the Sheriff sale. That will put the courts behind further slowing the process. In Minnesota there is a 6 month redemption period after the Sheriff sale. At the end of that time the home is fully foreclosed on. From that point it can take a bank anywhere from a week to several months to get that home on the market. Add all the these delays up and you are now looking at July as the possible starting point were we will start to see an increase in foreclosures hit the market.
For a buy the upside of missing he $8,000 tax credit will be more homes to choose from and perhaps a really great deal as well. Just something to consider.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Looking at the time line this is what I see. The moratorium ended last November and at that point the banks were still behind working on the loan modifications. Now that many are not working out the foreclosure process has started. As that increases so does the demand for the Sheriff sale. That will put the courts behind further slowing the process. In Minnesota there is a 6 month redemption period after the Sheriff sale. At the end of that time the home is fully foreclosed on. From that point it can take a bank anywhere from a week to several months to get that home on the market. Add all the these delays up and you are now looking at July as the possible starting point were we will start to see an increase in foreclosures hit the market.
For a buy the upside of missing he $8,000 tax credit will be more homes to choose from and perhaps a really great deal as well. Just something to consider.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Friday, March 12, 2010
To stage or not to stage? That is the question.
Do you know how long it takes a potential buyer to form an opinion of your home? Some buyers will decide in about 15 seconds whether your home goes on the "Rule this one out" list or the "Keep this on the potential list".
When it's time to sell, it doesn't matter how much you love your home's decor or how much it cost to get the look. It's not going to be your home any more. It's a commodity which must appeal to the largest number of people. It's not personal it just business. There are lots of great homes on the market so if you want to see that sold sign, it's time to get to work. The goal is to appear to give the most value for the dollar. One way to do this is to visit open houses or the parade of homes looking at homes that are twice the value of your home. Try to find a wall color to paint throughout the main level or other upgrading idea that will not empty your wallet but will make your home stand out above the rest of the competition.
By now, you have no doubt heard about staging and what an effective tool this can be when used properly. A recent poll of real estate agents indicates homes that were staged sold much more quickly and often for more money. You can hire an expert or do it yourself. The reason this is effective is you are not only selling your home but a lifestyle. You want to potential buyers to enter you home and see themselves living there.
The basic elements are simple, starting with depersonalizing your home. We tend to fill our homes with memories, including photos, knick knacks from trips, kids artwork and other items that declare to visitors, "I own this home". That's not what a buyer wants to see. They want to imagine themselves in this home for years to come making their own memories. It may be tough to do but you must remove family photos, religious objects and teddy bear collections. The last thing you want is for the buyers to spend more time looking at the people who own the home than the home itself.
The best selling advice you'll ever get is summed up in two words – de-clutter and Clean. Newspapers, magazines, books, lost socks, homework and mail are referred to as “visual dandruff” by decorating experts. It is the first thing a buyer will see and will visually impair the selling points of your home. Clear it away and while you're at it, remove any furniture that sticks out in walkways or obstructs doorways. If your sofa is a little too comfy, consider a slipcover or renting something more presentable. Arrange furniture to take advantage of a room's focal points, including windows or fireplaces. Try to make the rooms appear as big and open as you can.
Everything must look fresh and updated. One of the least expensive updates is paint. Choose neutral colors. Remove wallpaper it can be a turnoff along with pastel colored paint. Invest in new hardware for cabinet doors and take down the heavy drapery. Counter tops should be completely cleared except for maybe a small green plant or the coffee pot. Enhance your home's space even further by clearing out the closet and utility areas. Light, bright and airy is the look you're going for. Wash your windows!!
Continue your staging efforts on your home's exterior. Nothing is more important than a first impression. An attractive planter, new welcome mat and freshly painted door is an invitation to explore what's inside. Remove the dirt and cobwebs from last fall. Make sure all of your doors and windows open properly. A little bit of WD40 never hurts. I am sure you have heard the old saying "You never get a 2nd chance to make a 1st impression". It was probably said 1st about selling a home.
Staging will take a little time and money, but the results are worth it. In today's competitive market, it's a must. Remember staging is a word that means many different things, most important it means improvement. It does not have to cost thousands of dollars. Sometimes the smallest changes make the biggest differences.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
When it's time to sell, it doesn't matter how much you love your home's decor or how much it cost to get the look. It's not going to be your home any more. It's a commodity which must appeal to the largest number of people. It's not personal it just business. There are lots of great homes on the market so if you want to see that sold sign, it's time to get to work. The goal is to appear to give the most value for the dollar. One way to do this is to visit open houses or the parade of homes looking at homes that are twice the value of your home. Try to find a wall color to paint throughout the main level or other upgrading idea that will not empty your wallet but will make your home stand out above the rest of the competition.
By now, you have no doubt heard about staging and what an effective tool this can be when used properly. A recent poll of real estate agents indicates homes that were staged sold much more quickly and often for more money. You can hire an expert or do it yourself. The reason this is effective is you are not only selling your home but a lifestyle. You want to potential buyers to enter you home and see themselves living there.
The basic elements are simple, starting with depersonalizing your home. We tend to fill our homes with memories, including photos, knick knacks from trips, kids artwork and other items that declare to visitors, "I own this home". That's not what a buyer wants to see. They want to imagine themselves in this home for years to come making their own memories. It may be tough to do but you must remove family photos, religious objects and teddy bear collections. The last thing you want is for the buyers to spend more time looking at the people who own the home than the home itself.
The best selling advice you'll ever get is summed up in two words – de-clutter and Clean. Newspapers, magazines, books, lost socks, homework and mail are referred to as “visual dandruff” by decorating experts. It is the first thing a buyer will see and will visually impair the selling points of your home. Clear it away and while you're at it, remove any furniture that sticks out in walkways or obstructs doorways. If your sofa is a little too comfy, consider a slipcover or renting something more presentable. Arrange furniture to take advantage of a room's focal points, including windows or fireplaces. Try to make the rooms appear as big and open as you can.
Everything must look fresh and updated. One of the least expensive updates is paint. Choose neutral colors. Remove wallpaper it can be a turnoff along with pastel colored paint. Invest in new hardware for cabinet doors and take down the heavy drapery. Counter tops should be completely cleared except for maybe a small green plant or the coffee pot. Enhance your home's space even further by clearing out the closet and utility areas. Light, bright and airy is the look you're going for. Wash your windows!!
Continue your staging efforts on your home's exterior. Nothing is more important than a first impression. An attractive planter, new welcome mat and freshly painted door is an invitation to explore what's inside. Remove the dirt and cobwebs from last fall. Make sure all of your doors and windows open properly. A little bit of WD40 never hurts. I am sure you have heard the old saying "You never get a 2nd chance to make a 1st impression". It was probably said 1st about selling a home.
Staging will take a little time and money, but the results are worth it. In today's competitive market, it's a must. Remember staging is a word that means many different things, most important it means improvement. It does not have to cost thousands of dollars. Sometimes the smallest changes make the biggest differences.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Thursday, March 11, 2010
How important is the $8,000 tax credit? Maybe less important than you think.
With the $8,000 tax credit scheduled to come to an end at the end of April, word on the street is it will not be continued. I am on both sides of the fence of this issue. From a real estate agents perspective it would nice to see it continue to encourage 1st time buyers to buy a home. On the flip side as a tax payer it has to end to keep us as a country from going even further into debt.
So the down side if it ends you have missed your opportunity as a 1st time home buyer to get the tax break. However there is a big upside to this in the short term. The home affordability is through the roof right now and the interest rates are still incredible. Both of those factors are bound to change sooner or later. If some of the buyers fall out of the market because they don't understand the opportunity, several things could happen.
The amount of buyers per home will go down, which will increase you leverage as a buyer. In the Minneapolis/St. Paul area as of February 2010 there are 4 homes for every buyer. That is where we as agents like to see the market because it is balanced. If buyers drop out and inventory goes up your options improve. If the interest rates go up a good rule of thumb is to remember that for every percentage point the interest rate increases, you lose about 10% of your purchasing power. Meaning if you were to buy a $250,000 home at 5% and the rate goes up to 6%; the same payment will now buy you a $225,000 home. Once we have hit the bottom of the market and it is acknowledged by the press, it will already be on its way up again. Prices as well as interest rates can change quickly as we have seen in the past.
This is a wonderful time to buy a home with or without the tax credit, so get out there and find a home for yourself!
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
So the down side if it ends you have missed your opportunity as a 1st time home buyer to get the tax break. However there is a big upside to this in the short term. The home affordability is through the roof right now and the interest rates are still incredible. Both of those factors are bound to change sooner or later. If some of the buyers fall out of the market because they don't understand the opportunity, several things could happen.
The amount of buyers per home will go down, which will increase you leverage as a buyer. In the Minneapolis/St. Paul area as of February 2010 there are 4 homes for every buyer. That is where we as agents like to see the market because it is balanced. If buyers drop out and inventory goes up your options improve. If the interest rates go up a good rule of thumb is to remember that for every percentage point the interest rate increases, you lose about 10% of your purchasing power. Meaning if you were to buy a $250,000 home at 5% and the rate goes up to 6%; the same payment will now buy you a $225,000 home. Once we have hit the bottom of the market and it is acknowledged by the press, it will already be on its way up again. Prices as well as interest rates can change quickly as we have seen in the past.
This is a wonderful time to buy a home with or without the tax credit, so get out there and find a home for yourself!
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Thursday, February 4, 2010
Why the short sale contingency addendum is important for sellers as well as buyers.
This is a newer form in the state of Minnesota to further attempt to clarify issues in a purchase agreement, when dealing with a short sale. This is a great form because it does clarify 3 points that keep coming up. All of these points are negotiable. Below is the main language from the front page of the form.
SHORT SALE CONTINGENCY ADDENDUM
This form approved by the Minnesota Association of REALTORS®,
which disclaims any liability arising out of use or misuse of this form.
© 2009 Minnesota Association of REALTORS®
PART 1) The proceeds of the will not be sufficient to fully pay off all mortgages and other liens against the property. As a result, Seller must obtain “short sale” approval from one or more creditors. There may be various lien holders from whom Seller may need approval: this includes but is not limited to senior and junior liens, if any, homeowner’s associations or tax liens. Short Sale Approval in this Addendum is defined as a mutually acceptable agreement between the creditor and Seller to release their liens. This Purchase Agreement is contingent on the Short Sale Approval by Seller’s creditors. Seller shall obtain the Short Sale Approval(s) and notify Buyer, or licensee representing or assisting Buyer, in writing of the approval(s) no later than ______________. If Seller fails to obtain the necessary approval(s) and provide Buyer, or licensee representing or assisting Buyer, with written notice by this deadline, this Purchase Agreement is canceled, in which case Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement directing the release of the earnest money to Buyer
The following provision(s) modify and supersede any conflicting term(s) in the Purchase Agreement and any Addenda there to ONLY IF the corresponding box is marked (Select appropriate option(s)
PART 1 EXPLAINS THAT THERE IS A TIME LIMIT ON HOW LONG THE BUYER WILL AGREE TO WAIT FOR THE SELLER TO GET THE NECESSARY APPROVAL IN WRITING FROM THE BANKS TO MOVE FORWARD WITH A SHORT SALE. THIS IS A VERY NEGOTIABLE POINT BECAUSE IT HAS TO BE LONG ENOUGH FOR THE SELLER TO OBTAIN APPROVAL BUT NOT LOCK THE BUYER IN FOR 6 MONTHS. IT ALSO MAKES BOTH PARTIES AWARE THAT THE BANKS DO AVE TO GIVE APPROVAL. SOUNDS OBVIOUS BUT TO SOME IT IS NOT. IF THE SELLERS DON'T GET APPROVAL WITHIN THAT TIME LINE CONTRACT IS CANCELLED.
PART 2) Not withstanding any provision of this Purchase Agreement to the contrary, Buyer shall not be required to provide earnest money until Short Sale Approval has been obtained. Buyer shall pay the earnest money within three business days after Seller provides written notice to Buyer, or licensee representing or assisting Buyer,
that said approval has been obtained from all mortgagees and lien holders.
PART 2 EXPLAINS WHERE THE EARNEST MONEY STAYS. TYPICALLY IN THE STATE OF MINNESOTA IT IS REQUIRED THAT THE EARNEST MONEY BE DEPOSITED IN TO A BROKERS TRUST ACCOUNT WITHIN 3 BUSINESS DAYS OF FINAL ACCEPTANCE.
PART 3) Not withstanding any provision of this Purchase Agreement to the contrary, the time frame to perform inspection(s) shall commence on the date that Seller provides written notice of Short Sale Approval from all mortgagees and lien holders to Buyer, or licensee representing or assisting Buyer, rather than on final acceptance of this Purchase Agreement.
PART 3 EXPLAINS THAT THERE WILL BE NO INSPECTION UNTIL APPROVAL OF A SHORT SALE HAS BEEN OBTAINED RATHER THAN WITHING X NUMBER OF DAYS FROM THE FINAL ACCEPTANCE. THIS WAY THE BUYER IS NOT SPENDING MONEY ON A HOME THEY MIGHT BE ABLE TO BUY.
PART 4) Notwithstanding any provision of this Purchase Agreement to the contrary, Seller, or licensee representing or assisting Seller, SHALL or SHALL NOT have the right to continue to offer the property for sale until this contingency is removed.
PART 4 EXPLIANS THAT SOME BUYERS FEEL THE HOME SHOULD BE PUT INTO PENDING AS SOON AS THE BUYERS AND SELLERS AGREE TO THE CONTRACT. DUE TO THE LENGTH OF TIME TO GET AN APPROVAL FROM THE BANK, THIS MAY NOT BE A WISE MOVE ON THE SELLERS PART. IT ALL COMES BACK TO NEGOTIATION AND WHAT THE OTHER PARTS OF THE CONTRACT SAY.
THIS PAGE IS PART OF A LEGALLY BINDING CONTRACT BETWEEN BUYER(S) AND SELLER(S).
IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL.
This form has saved a lot of hassle and misunderstanding for me on both sides of a transaction and is some thing to consider.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
SHORT SALE CONTINGENCY ADDENDUM
This form approved by the Minnesota Association of REALTORS®,
which disclaims any liability arising out of use or misuse of this form.
© 2009 Minnesota Association of REALTORS®
PART 1) The proceeds of the will not be sufficient to fully pay off all mortgages and other liens against the property. As a result, Seller must obtain “short sale” approval from one or more creditors. There may be various lien holders from whom Seller may need approval: this includes but is not limited to senior and junior liens, if any, homeowner’s associations or tax liens. Short Sale Approval in this Addendum is defined as a mutually acceptable agreement between the creditor and Seller to release their liens. This Purchase Agreement is contingent on the Short Sale Approval by Seller’s creditors. Seller shall obtain the Short Sale Approval(s) and notify Buyer, or licensee representing or assisting Buyer, in writing of the approval(s) no later than ______________. If Seller fails to obtain the necessary approval(s) and provide Buyer, or licensee representing or assisting Buyer, with written notice by this deadline, this Purchase Agreement is canceled, in which case Buyer and Seller shall immediately sign a Cancellation of Purchase Agreement directing the release of the earnest money to Buyer
The following provision(s) modify and supersede any conflicting term(s) in the Purchase Agreement and any Addenda there to ONLY IF the corresponding box is marked (Select appropriate option(s)
PART 1 EXPLAINS THAT THERE IS A TIME LIMIT ON HOW LONG THE BUYER WILL AGREE TO WAIT FOR THE SELLER TO GET THE NECESSARY APPROVAL IN WRITING FROM THE BANKS TO MOVE FORWARD WITH A SHORT SALE. THIS IS A VERY NEGOTIABLE POINT BECAUSE IT HAS TO BE LONG ENOUGH FOR THE SELLER TO OBTAIN APPROVAL BUT NOT LOCK THE BUYER IN FOR 6 MONTHS. IT ALSO MAKES BOTH PARTIES AWARE THAT THE BANKS DO AVE TO GIVE APPROVAL. SOUNDS OBVIOUS BUT TO SOME IT IS NOT. IF THE SELLERS DON'T GET APPROVAL WITHIN THAT TIME LINE CONTRACT IS CANCELLED.
PART 2) Not withstanding any provision of this Purchase Agreement to the contrary, Buyer shall not be required to provide earnest money until Short Sale Approval has been obtained. Buyer shall pay the earnest money within three business days after Seller provides written notice to Buyer, or licensee representing or assisting Buyer,
that said approval has been obtained from all mortgagees and lien holders.
PART 2 EXPLAINS WHERE THE EARNEST MONEY STAYS. TYPICALLY IN THE STATE OF MINNESOTA IT IS REQUIRED THAT THE EARNEST MONEY BE DEPOSITED IN TO A BROKERS TRUST ACCOUNT WITHIN 3 BUSINESS DAYS OF FINAL ACCEPTANCE.
PART 3) Not withstanding any provision of this Purchase Agreement to the contrary, the time frame to perform inspection(s) shall commence on the date that Seller provides written notice of Short Sale Approval from all mortgagees and lien holders to Buyer, or licensee representing or assisting Buyer, rather than on final acceptance of this Purchase Agreement.
PART 3 EXPLAINS THAT THERE WILL BE NO INSPECTION UNTIL APPROVAL OF A SHORT SALE HAS BEEN OBTAINED RATHER THAN WITHING X NUMBER OF DAYS FROM THE FINAL ACCEPTANCE. THIS WAY THE BUYER IS NOT SPENDING MONEY ON A HOME THEY MIGHT BE ABLE TO BUY.
PART 4) Notwithstanding any provision of this Purchase Agreement to the contrary, Seller, or licensee representing or assisting Seller, SHALL or SHALL NOT have the right to continue to offer the property for sale until this contingency is removed.
PART 4 EXPLIANS THAT SOME BUYERS FEEL THE HOME SHOULD BE PUT INTO PENDING AS SOON AS THE BUYERS AND SELLERS AGREE TO THE CONTRACT. DUE TO THE LENGTH OF TIME TO GET AN APPROVAL FROM THE BANK, THIS MAY NOT BE A WISE MOVE ON THE SELLERS PART. IT ALL COMES BACK TO NEGOTIATION AND WHAT THE OTHER PARTS OF THE CONTRACT SAY.
THIS PAGE IS PART OF A LEGALLY BINDING CONTRACT BETWEEN BUYER(S) AND SELLER(S).
IF YOU DESIRE LEGAL OR TAX ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL.
This form has saved a lot of hassle and misunderstanding for me on both sides of a transaction and is some thing to consider.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Monday, February 1, 2010
Short sale seller information. Some facts you should know before making a decision.
I am continuing with short sales in many of my blogs due to the continuing confusion about them completely understandable. There seems to be so much misinformation floating around about them. Not to mention the amount of calls and emails I receive from both buyers and sellers wanting information. They usually begin with I heard from my friend or read some where about x, is that true?
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a seller vs. a buyer. Below is a basic outline of what I typically cover with a seller when we sit down the first time to discuss the selling process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are. An experienced agent will be very helpful in that regard. Again I can't stress enough how important it is to speak with an attorney and tax accountant before making a decision to short sale your home. Every states laws are different and you need to know where you stand.
A short sale occurs when the proceeds of your home sale will not be sufficient to fully repay your creditors. Because of this, it will be necessary to come to an agreement with your creditors to accept less than the full amount of the debt you owe in order to release the liens on your property. Without this agreement, your home cannot be sold (unless you are able to bring money to the closing). If you are facing foreclosure, the decision to proceed with a short sale or to allow the property to be foreclosed is a difficult one. You should consult with an attorney or tax advisor before making your decision. There are also several nonprofit organizations that may be able to help with this decision.
Should you choose to pursue a short sale, there are a number of issues to keep in mind:
Your creditor will likely communicate with you by mail to indicate whether it will accept less than it is owed. If the creditor approves, the creditor will agree to release the liens on the property. But you should also determine whether the creditor intends to waive its rights to any shortfall, or whether it intends to pursue you for the shortfall after closing. If the communication regarding this issue is at all unclear, it is very important that you contact the lender for clarification before continuing with the sale.
If you are in the process of foreclosure, it is important to understand that the process will continue even though you are pursuing a short sale. Typically, a foreclosing lender will not delay the foreclosure process because you have the property on the market or even if you have a purchase agreement signed. Therefore, you need to stay informed about your foreclosure process, and in particular understand the redemption period deadline that may apply.
There may be tax consequence to you as a result of the short sale. For example, if your short sale involves the sale of property that is not your primary residence, you will be taxed on any “forgiven” debt. Other rules apply; it is important that you contact a tax consultant before making your decision.
In Minnesota we have a longer redemption period than many states which can work in the favor of both the sellers as well as the buyers. It can take a long to get all of this sorted out, so know as much about the process going it. Believe it or not the more you know of your situation the easier it will be to make the right decision for you. Don't just jump into it without all the facts, the process is hard enough on a family already. By doing the research first it should ease the burden a bit.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a seller vs. a buyer. Below is a basic outline of what I typically cover with a seller when we sit down the first time to discuss the selling process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are. An experienced agent will be very helpful in that regard. Again I can't stress enough how important it is to speak with an attorney and tax accountant before making a decision to short sale your home. Every states laws are different and you need to know where you stand.
A short sale occurs when the proceeds of your home sale will not be sufficient to fully repay your creditors. Because of this, it will be necessary to come to an agreement with your creditors to accept less than the full amount of the debt you owe in order to release the liens on your property. Without this agreement, your home cannot be sold (unless you are able to bring money to the closing). If you are facing foreclosure, the decision to proceed with a short sale or to allow the property to be foreclosed is a difficult one. You should consult with an attorney or tax advisor before making your decision. There are also several nonprofit organizations that may be able to help with this decision.
Should you choose to pursue a short sale, there are a number of issues to keep in mind:
Your creditor will likely communicate with you by mail to indicate whether it will accept less than it is owed. If the creditor approves, the creditor will agree to release the liens on the property. But you should also determine whether the creditor intends to waive its rights to any shortfall, or whether it intends to pursue you for the shortfall after closing. If the communication regarding this issue is at all unclear, it is very important that you contact the lender for clarification before continuing with the sale.
If you are in the process of foreclosure, it is important to understand that the process will continue even though you are pursuing a short sale. Typically, a foreclosing lender will not delay the foreclosure process because you have the property on the market or even if you have a purchase agreement signed. Therefore, you need to stay informed about your foreclosure process, and in particular understand the redemption period deadline that may apply.
There may be tax consequence to you as a result of the short sale. For example, if your short sale involves the sale of property that is not your primary residence, you will be taxed on any “forgiven” debt. Other rules apply; it is important that you contact a tax consultant before making your decision.
In Minnesota we have a longer redemption period than many states which can work in the favor of both the sellers as well as the buyers. It can take a long to get all of this sorted out, so know as much about the process going it. Believe it or not the more you know of your situation the easier it will be to make the right decision for you. Don't just jump into it without all the facts, the process is hard enough on a family already. By doing the research first it should ease the burden a bit.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Short sale buyer information. Some facts you should know before making a decision.
I am continuing with short sales in many of my blogs due to the continuing confusion about them completely understandable. There seems to be so much misinformation floating around about them. Not to mention the amount of calls and emails I receive from both buyers and sellers wanting information. They usually begin with I heard from my friend or read some where about x, is that true?
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a buyer vs. a seller. Below is a basic outline of what I typically cover with a buyer when we sit down the first time to discuss the buying process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are.
When we are talking about a short sale, we are not talking about a bank-owned property. A short sale occurs when the proceeds of a home sale will not be sufficient to fully repay the seller’s creditors. Because the creditors cannot be paid in full, the seller will need to obtain an agreement from the creditors that they will accept something less than what they are owed. While it is possible to get a good deal on the price of a short sale property, there are a number of issues unique to short sales that are worth considering:
First and foremost, you typically need to have a lot of patience when trying to purchase via short sale. Even though you may have signed a purchase agreement with the seller, it will take some time before you know whether the transaction will close. It can easily take 30-60 days to get a lender to respond to a request for a short sale. It may take longer. And there are sometimes multiple creditors from whom approval will be needed. This can further extend the wait time.
Many short sales are not approved. Just because you might have the highest offer for the property does not mean that it will be approved by the lender. Many purchase agreements fail because the lender chooses not to approve the short sale or because the lender grants approval on terms unacceptable to the seller.
You could have expenses that are not reimbursed. For example, if you incur the costs of an inspection or an appraisal prior to creditor approval, you will typically not be able to recover those expenses.
Unless otherwise agreed in the purchase agreement, the seller may accept offers that come in after your offer. Just because you had the first offer that was accepted by the seller does not mean that you have a superior right to the property. All purchase agreements will typically be contingent on bank approval, and the bank will approve only one, normally the highest and best offer.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
Even though both sides of the transaction feels the pain of the whole thing, there are very different things to consider if you are a buyer vs. a seller. Below is a basic outline of what I typically cover with a buyer when we sit down the first time to discuss the buying process. The one thing you always want to keep in mind is every transaction is different and there are many unknowns that come up. That is something you can't control no matter how prepared you are.
When we are talking about a short sale, we are not talking about a bank-owned property. A short sale occurs when the proceeds of a home sale will not be sufficient to fully repay the seller’s creditors. Because the creditors cannot be paid in full, the seller will need to obtain an agreement from the creditors that they will accept something less than what they are owed. While it is possible to get a good deal on the price of a short sale property, there are a number of issues unique to short sales that are worth considering:
First and foremost, you typically need to have a lot of patience when trying to purchase via short sale. Even though you may have signed a purchase agreement with the seller, it will take some time before you know whether the transaction will close. It can easily take 30-60 days to get a lender to respond to a request for a short sale. It may take longer. And there are sometimes multiple creditors from whom approval will be needed. This can further extend the wait time.
Many short sales are not approved. Just because you might have the highest offer for the property does not mean that it will be approved by the lender. Many purchase agreements fail because the lender chooses not to approve the short sale or because the lender grants approval on terms unacceptable to the seller.
You could have expenses that are not reimbursed. For example, if you incur the costs of an inspection or an appraisal prior to creditor approval, you will typically not be able to recover those expenses.
Unless otherwise agreed in the purchase agreement, the seller may accept offers that come in after your offer. Just because you had the first offer that was accepted by the seller does not mean that you have a superior right to the property. All purchase agreements will typically be contingent on bank approval, and the bank will approve only one, normally the highest and best offer.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
Follow me on facebook - Tom Sommers Edina Realty Twitter - usearealtor
or any of my Web Sites:
www.tomsommers.com
www.allmnhomes.com
www.tomsommers.edinarealty.com
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