What is a short sale?

A short sale or pre-foreclosure as it is sometimes called is when a home owner is selling the home for less than what is owed on the mortgage/s, not at all uncommon in today’s environment. Because of this the seller needs to convince his/her mortgage company that there is good reason to accept the short sale and settle the loan for less than what is owed.

From a potential buyer’s perspective the main considerations of purchasing a home in a stage of pre-foreclosure is the length of time it can take to close a short sale purchase and a degree of uncertainty with regards to the seller’s lender agreeing to the sale and subsequent loss. But with some patience, buyer’s can find good homes in attractive neighborhoods at bargain prices by shopping the short sale side of the market.

For distressed homeowners a successful short sale can be salvation. A full on foreclosure has significant consequences beyond destroying a person’s credit. A foreclosure on one’s credit report can affect future employment opportunities as many employers run credit checks on perspective employees. Foreclosure can remain on your credit report for 10 years or more and is a matter of public record permanently. As a result future employment options can be severely limited. Even current employers may run a credit checks resulting in loss of promotion, demotion or out right job loss. And if the job requires security clearance, foreclosure is the most challenging issue outside of a conviction for a serious misdemeanor of felony.

Short sales can also have a less negative impact on a homeowner’s credit. A homeowner, who successfully negotiates and closes a short sale, for this I highly recommend using a CDPE accredited Realtor, will be eligible for a Fannie Mae backed mortgage in 2 years. Additionally, only the late payments on the mortgage will show on their credit report and after the sale the mortgage will be reported as paid or negotiated. This may only lower their credit score as little as 50 points if all other bills/payments have been made on time.

While there are other options for homeowners in distress such as forbearance, mortgage modification, and short-refinancing; short sales are worth serious consideration. If you or anyone you know is needs help to prevent foreclosure please contact me.

Home Equity Theft Prevention Act!

I generally try to avoid commenting on politics here but I am making an exception in this case, primarily because it is real estate related.

Currently, Arizona does not have a real estate transfer tax (RETT). But the state legislature has considered passing laws to impose the tax in the past. There are already 35 states in which home sellers are required pay a tax when they sell a home, land, or commercial real estate. Think of it as sales tax on any real estate sold but instead of being paid by the buyer it is paid by the seller.

Tax rates on real estate sales in other states range from 0.1% to 2.2%. On a $200,000 home sale that would be $200 to $2,000 out of your pocket. What’s worse is that many of these taxes don’t consider any loan principal you might owe and you pay the tax based on the full sales price of the home. Hardly, fair to say the least.

Proposition 100 , also known as the Protect Our Homes Act, is an Initiative that, if passed, would prohibit the state government from charging any new tax on the sale or transfer of real property in Arizona and it is on this year’s ballot.

You might be saying, “Don’t I already pay property taxes?” And the answer is, if you own real estate in Arizona you do. A RETT would be a new tax and it would be in addition to property taxes you already pay. And if that isn’t double taxation I don’t know what is.

When you go to the polls on Nov. 8th remember a “Yes” vote on Proposition 100 would prevent the Arizona State Legislature from passing any future taxes on the sale of real estate.