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Cannot Get Off the Plane Without a Buyer Cancellation
Welcome to the Sacramento fall real estate market and the increasing likelihood of a buyer cancellation. No sooner did my plane land in Sacramento last night than I received a buyer cancellation. Couldn’t even get off the aircraft without a buyer flaking. Buyers are dropping like flies lately, left and right. One listing I’ve put back on the market four times. Count ’em, four times. That’s just nuts. The seller can’t believe his eyes. And it’s almost never about the property itself as it is about the buyer’s insecurities, confusion and ultimate inability to perform.
Now, I don’t hear these sorts of stories from my team members. On the Elizabeth Weintraub Team, I take the listings and my team members work with our buyers. Every once in a while they might work with a buyer who freaks out over a repair and elects to cancel, but it’s not happening at the rapid pace for them as it is on my listing end. So, that makes me wonder if other buyer’s agents aren’t qualifying their buyers or providing adequate counseling.
Hate to admit that the art of real estate counseling as taught almost 50 years ago is truly a lost art among many agents in this day and age. Such a shame. Charles Chatham should be rolling over in his grave.
The buyer cancellation I dealt with last night was on a property that took the buyer almost two weeks to decide to buy. Who waits two weeks to figure out if they should make an offer? In a market of limited inventory, rising prices and increasing interest rates? Probably a buyer who is not all that committed to start with.
If we sold real estate in Sacramento like they do in the Bay Area, this stuff would not be happening. When a buyer makes an offer in the Bay Area, typically that buyer receives upfront disclosures and reports to review. They also don’t employ a ton of weasel clauses like we do.
While in Hawaii, I’d been corresponding with Ken Harney at the Washington Post, after he reached out to me. Mostly to talk about why the public can’t view ethics violations at NAR. But also about our squirrelly local real estate market, which reflects what is happening nationally. He calls the Bay Area its “own separate universe,” and he’s right.
We’ll see how things go this weekend. This week has been fairly quiet, and often the first Sunday after Labor Day is busy. Keeping a buyer in escrow is tricky at best. And the real bummer is the listing agent has absolutely zero control over a buyer cancellation. The listing agent doesn’t talk to the buyer, can’t advise the buyer, and needs to remain hands off. Which means the person responsible for the buyer is the buyer’s agent.
Some buyer’s agents don’t even have the decency to call listing agents to discuss. Nope, they just shoot over the buyer cancellation in an email and call it a day.
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.
