Email Elizabeth
Elizabeth Weintraub
Why You Might Not Care About Mortgage Debt Relief
Many of my Sacramento short sale sellers are concerned about the mortgage debt relief extension, which is presently sitting at the U.S. Senate in limbo. Mortgage debt relief is the process of relieving a seller of having to pay taxes on forgiven / canceled debt. For example, if you sell a home for $100,000 and you owe $200,000, the bank is forgiving $100,000 of debt when it does a short sale or a foreclosure. Under regular IRS rules, you might be responsible for paying taxes on $100,000 of income that you did not get in your hot little hands. If you’re in a 30% tax bracket, that’s $30,000 you could owe the IRS.
At present, this relief from taxation expires at the end of this month, on December 31, 2012. There is a bill extending the relief through 2013. It stems from an original bill that was passed 5 years ago and has been extended ever since: the 2007 Mortgage Forgiveness Debt Relief Act. The big question is will it be extended again?
The bigger question should be what happens if it doesn’t? Are you affected? This is the question I would like every Sacramento area short sale seller to ask an accountant. Don’t go poking around online reading crap that may or may not be true — including this blog. I am not an accountant. I cannot give you tax advice. I am a Sacramento short sale agent. I sell homes all over a four-county area. Lots of them. More than 100 a year. But I don’t give tax advice.
Having said that, I will tell you that accountants have told me that California purchase money loans are not affected. They say it does not matter whether you close this year or next year or ten years from now, if you have a purchase money loan and you live in California, there are no taxes due on that canceled debt. Furthermore, mortgage debt relief is not a short sale exception. If you have to pay taxes for some reason on canceled debt, it applies to foreclosures as well as short sales. So, opting for foreclosure instead of doing a short sale is not going to save your butt. But don’t take it from me, ask your accountant.
Moreover, ask your accountant about insolvency exceptions. If you owe more than your assets are worth, you might be insolvent. Insolvency does not mean you are sleeping under a bridge and holding a sign saying something goofy like you will work for food when what you mean is you would like somebody to give you some money. It means your liabilities exceed your assets. Almost every short sale seller is in that boat. If you are insolvent, the government makes an exception for you.
So, before you get all excited over whether the mortgage debt relief will be extended, please, I beg of you, talk to an accountant. Doing a short sale is stressful enough without adding this little quirk to it. It might be totally unnecessary for you to stress over mortgage debt relief. Read this recent article by reporter Ken Harney in the Washington Post, after he interviewed this Sacramento short sale agent about mortgage debt relief.
An Exception for a Dying Man
I am presently working on a short sale for a seller who is dying from terminal cancer. This short sale seller is trying to get financial affairs in order so his wife is not burdened with more than a broken heart and shattered spirit. After months of negotiation, we are down to the wire. We finally have agreement on terms, conditions and are ready to close between the two short sale lenders. The second lender, CCO through RBS Citizens Bank, says it cannot give a dying man an extra 10 days to close escrow. RBS Citizens Bank says: Merry Christmas and don’t let the casket door hit you.
You might think I am a soft touch who runs around hugging trees and waving the give-my-client-an-exception flag, and you might be partially right, but I am stronger than you might think. As a Sacramento short sale agent, I believe that sometimes rules need to be broken. I don’t always cross the street at the corner — sometimes I jaywalk — but I don’t run through red lights. I am not asking RBS Citizens to do anything against the law, we’re asking to give a dying guy and his family a break and let them close by New Year’s Eve.
The negotiator wants to start over with the short sale. Starting over means a new BPO and all new paperwork. RBS Citizens Bank has been working on this file since July. It took the bank 3 months just to get the first BPO, which was completed in September. The BPO makes no difference in this situation, really, because RBS Citizens Bank is getting the maximum that Fannie Mae will allow. The BPO is just a technicality.
We had this once approved as a Bank of America Cooperative Short Sale, but RBS Citizens Bank fought with us for 5 months. By then, the Cooperative Short Sale had expired. Bank of America refused to renew or extend the Cooperative Short Sale status. That’s why it took us another 2 months to go the traditional route, but we finally got approval from Bank of America . . . and now . . . now RBS Citizens Bank will not give the buyer the extra 10 days the buyer needs to close her loan. RBS says the approval expires on the 20th and they need to start over. By the time they redo the short sale and all of the paperwork, the seller, quite literally, could be dead.
I don’t know about you, but my heart hurts.
Protect Your Home From AC Unit Theft
You can prevent the theft of air conditioning units from your yard.
Sometimes, when you don’t want to be protected, you are and when you do want protection, you can’t get it. For example, last Sunday I told my husband that we needed to go to Target to buy our Ragdoll cat, Jackson, a Wii game. For Hanukkah, you understand, as a Hanukkah present. But my husband chose to argue instead and, quite rightly pointed out, that Jackson could not possibly be Jewish because he is white with blue eyes. Our brown cats, Pia and Pica, now those guys are not chopped liver. A Wii game, by the time you’re done buying all the remotes, miscellaneous games and accessories, is pretty expensive, but Pia and Pica really deserved a Wii, so I tried to write a check.
Nope. The system spit my check out like it was evil. Like it came from Donald Trump. Hey, I’m just a Sacramento short sale agent, but I had enough funds in my account to cover this purchase. I urged the clerk at Target to try it again. Nope. It was rejected. I handed the clerk my debit card and we swiped it. Rejected. It spit out a piece of paper with a phone number on it, which we called. Turns out there was nothing wrong with my account. The problem is I have no record of writing checks for huge sums of money at Target so my ability to access my checking account was restricted by some autobot. This is not “protection” that I want, even though it’s presented as personal protection.
Of course, when you want protection, though, it’s hard to obtain. Isn’t that how life is? This month I had my third AC unit reported stolen from one of my listings in Sacramento. Thieves are ripping them out of the yard. And they cost on average between $2,500 to $4,000 to replace. They’re not cheap. Thieves are after the aluminum and copper coil in the unit, which they sell to recyclers for about 200 bucks.
The Sacramento police department recommends 5 things you can do to protect your home from AC unit theft:
- Replace the screws on your AC unit with security screws, available at hardware stores.
- Add an AC Alarm to your home security alarm, which will sound your home alarm if the AC unit loses pressure.
- Install an AC unit cage and lock it down to your pad.
- Ask your neighbors to dial 9-1-1 if they spot suspicious people in the yard.
- Install a GPS motion detector, and pay the annual fee.
It goes without saying to keep your insurance policy in force. Especially if your home is on the market as a short sale. Be sure to check with your insurance agent if your home is unoccupied for more than 30 days — because some insurance companies do not honor claims made against a vacant home. You may want to lower your deductible since that is an out-of-pocket expense. And remember, just because your insurance policy has not been canceled does not mean you have a vacant home insurance policy that covers theft or vandalism to a vacant home. AC unit theft is on the rise in Sacramento.
The Golden 1 Short Sale is Not Golden
I know of agents in Sacramento who will not touch a Golden 1 short sale with a 10-foot pole, but I am not one of them. The reason many agents don’t want to do a short sale that involves The Golden 1 Credit Union is because the Credit Union slashes the agents’ commission into shreds. It shows little respect for the vast amount of work a Sacramento short sale agent undertakes or for the buyer’s agents who faithfully and unknowingly guide their buyers into waiting for an approval on a Golden 1 short sale.
I am a shareholder of The Golden 1 Credit Union. As such, and as a short sale agent, I put forth a plea last week that fell on deaf ears and glued-shut eyeballs. I pleaded for an exception for my seller. He is a sudden widow. His wife occupied the property, not he. He came over to check on her and the back door was open. She was in bed. Dead. She had been dead for 3 days. But he’s on the loan, along with the deceased.
This is a second loan in a short sale. The first lender offered The Golden 1 10% of its unpaid principal balance, which is unusual. Typically, the amount that is offered to the second lender is about 6% of the unpaid principal balance. The Golden 1 denied and rejected that offer. The Golden 1 is demanding more than three times that amount. The management at the credit union has no mercy for this seller nor his unfortunate situation.
We sent them the death certificate to show the seller died in the house, but Golden 1 doesn’t care. The negotiator suggested that the agents should work pro bono and donate to the credit union all of the commission, and then perhaps borrow additional funds to make up the deficit. Because even all of our commission payment is not enough to satisfy the Credit Union. This is how the Credit Union treats a sudden widower. It makes me embarrassed to be a stockholder. This is not some guy trying to stick it to the bank. This is a guy in bereavement who is trying to do the right thing by doing a short sale.
Because I am an experienced short sale agent, we have other avenues to pursue to try to save our seller. But it’s not pretty, and the buyer is in tears. Why can’t The Golden 1 make this situation an exception? I’m a member. You’re probably a member. It says it wants to protect its members but instead it shows it has no heart. No big surprise there, I guess. It just goes to show that The Golden 1 will probably kick you when you’re down, too.
A Countrywide Short Sale in East Sacramento
I recently closed a double Countrywide Cooperative Short Sale through Bank of America in East Sacramento in which the seller received almost $17,000. He had been recommended to this Sacramento short sale agent by a former client who had insisted that he call me. That’s probably because I handle each of my short sales with focused attention. Because each one is different. See, another agent might have just listed this short sale and sold it without giving the seller any cash. But if there a way I can get my sellers cash without making them totally miserable in the process, I go for it.
This home in East Sacramento was also owned by a lawyer. I handle many short sales for lawyers, and I really enjoy working with lawyers. One of the super fun aspects of working with a lawyer is when I get to say that I cannot give legal advice. That tickles me to no end. At least lawyers understand this concept, though, and they don’t keep grinding me.
The minute I spotted the double Countrywide loans in the public records, I suspected this short sale would make a good candidate for the Cooperative Short Sale program at Bank of America. I don’t know if B of A specifically targets those old Countrywide loans, but if I were Bank of America, I know I’d want to get rid of them. It’s not bad enough that Bank of America is being sued by the Feds for Countrywide’s old HSSL (high speed swim lane) — a loan process of pushing loans forward, allegedly with little regard for accuracy or conformity — but the process had became known as the Countrywide Hustle, a practice carried on after Bank of America took over Countrywide. Bad on so many levels.
Still, we started this short sale in May of this year. A time of year so beautiful in Sacramento that it’s like living in Carmel without the prices of Carmel except, yeah, we don’t have any dogs running on the beach or a beach — just clay soil and skunks in the yard. By August, we finally had our Cooperative Short Sale agreement signed and approved. I don’t put my short sales like this on the market until we get the short sale preapproved. Why drag sellers and buyers through that process? I’ve learned over the years that it’s much better to just wait. After we got the approval, it took B of A another month to come up with the BPO. By mid September, we were ready for the market. Who says a Sacramento short sale agent doesn’t have patience?
However, the good news is once we had everything in place and received an offer, the bank approved the short sale in 3 weeks. Bank of America just zips along when finally in Equator, and receiving the preapproval for the Cooperative Short Sale upfront really speeds up the process. Plus, the seller received almost $17,000, which he wasn’t expecting. He was happy to simply short sale the East Sacramento house and to obtain a release of liability. The cash was simply icing on the cake.
