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How to Sell a Short Sale With a Tax Lien
You can short sale a home with state or federal tax liens.
We just closed a short sale with a tax lien in Elk Grove. Tax liens are not a new thing; often when people fall into financial troubles, they end up owing the Franchise Tax Board (California state taxes) along with the usual suspect, the I.R.S. If things are so rough that you can’t make your mortgage payment, you probably can’t pay the I.R.S either. When you don’t pay the government, federal or state, the government files a tax lien against you, which is recorded in the public records of the county where you own property.
The interesting fact about personal income tax liens is a seller can sell a short sale with a tax lien because they can be released during the short sale. Ordinarily, you can’t close a short sale with outstanding liens in the public records because the buyer’s lender would object and refuse to close. It’s tough enough getting the short sale banks to understand that the personal income tax liens can be released to allow the short sale. The bank negotiators sometimes demand the tax lien be released before they will issue the short sale approval letter, which is ridiculous and impossible, so we just escalate the issue up the ranks until we find a more intelligent person to deal with.
Doing a Short Sale With a Tax Lien
The reason the government will release the tax liens is because there is no equity in the home to pay the IRS and / or Franchise Tax Board. You can’t squeeze blood out of a beet. However, it is gaining the cooperation of these government entities that is the chore. In Sacramento short sales, we deal with personal income tax liens quite a bit. Last year, it was easier to obtain the tax lien release. We could call the IRS, cry and beg, and some kind person would take pity on us and send the tax lien release. This year it’s been tougher.
The IRS office in Oakland disconnected its phone recently and said we are no longer allowed to call. We can’t email either. Everything has to be communicated through the ancient ritual of faxing. What’s next — smoke signals? Their paperwork states they won’t begin to consider a tax lien release until we have the short sale approval letter. In the event of two lenders, like this last Elk Grove short sale, we needed both letters. And then the IRS can take 60 days. Which means one if not both of the short sale approval letters will expire.
Ocwen made us start over from scratch on this last short sale with a tax lien. It took almost 6 weeks to issue the new approval letter. We recorded the day before the tax lien release expired. By the hair of our chinny-chin-chin. We received the final approval with 6 days to go before the tax lien release expired. The investor buyer had been waiting since October and had already spent his capital on other properties. He didn’t know if he could find the cash now. Well, guess what? Deposit funds or, if we have to start over from the very beginning, we won’t sell to him. He found the cash, and we closed.
And now for my commercial . . . if you need a Sacramento Short Sale Agent with extensive short sale expertise, call Elizabeth Weintraub at 916.233.6759. Don’t leave yourself vulnerable.
Open House Sunday at Home in Laguna West
9138 Bearint Way in Laguna West
This part of Elk Grove features meticulously spaced trees, growing inside rectangular borders in the streets, which lends a nice flavor to these particular homes in Laguna West, and many of the streets are wider than normal. A bonus perk to many of these homes is alley access through double gates to the RV parking available in the back yard. Or, you can simply pull through the 3-car tandem garage and park your boat or camper on the slab out back. Few homes in Laguna West offer the RV option, but you’re in luck today.
Open today is a home in Laguna West with 4 bedrooms, 2 1/2 baths, and all of the bedrooms are located on the second floor, freeing the lower level for entertainment and dining. The sellers installed an expensive double door to the exterior and removed the ugly sliding door prevalent in so many other homes from the kitchen. They also laid custom pavers in the kitchen and bath, and coordinated the complementary backsplash in tile, including the fireplace surround.
Updated kitchen at 9138 Bearint Way in Laguna West
This home in Laguna West is situated up a hill. The kitchen and family room are open and visible from the front door as you enter the living room. There is an island in the kitchen, offering a dining bar option, and a breakfast nook. Appliances feature a built-in gas cooktop, double-racked oven, built-in microwave and a dishwasher.
Upstairs you’ll find a bonus room at the top of the second floor, which has a door (as opposed to many bonus rooms that are open) and the open walls have been closed in with materials lending an Asian flair. In fact, it could be a 5th bedroom if one so desires. The master suite is located at the back of the home and it overlooks the patios below, featuring double walk-in closets. Of course, there are double vanities in the master suite bath, a full-sized tub and separate shower.
9138 Bearint Way, Elk Grove, CA 95758. Open Sunday, June 14, 2015, 2:00 to 4:00. This home in Laguna West is offered exclusively by your Elk Grove agent Elizabeth Weintraub at Lyon Real Estate as a short sale at $389K.
Buyers for Short Sales in Elk Grove Make or Break the Short Sale
About one out of every 3 homes in Elk Grove that I sell nowadays seem to be a short sale. How are short sales in Elk Grove still a thing, you might wonder. I mean, you read about the economic recovery, how much homes have appreciated, and it doesn’t seem to make sense that home sellers can still be underwater. Take 2012, when home prices, on average, shot up about 40% in Elk Grove. Then, along came 2013 and we witnessed another 25% bump. Last year was single digits and not as impressive, so the big increases are pretty much over.
I see the continuation of short sales in Elk Grove to be a mix of several factors. First, Elk Grove was named in 2006 the fastest growing city in the United States. Not in California, the United States. When the market collapsed, Elk Grove was hit very hard, and prices fell more than 50%. To put this into perspective, if a home was worth $500,000, after the crash it was worth maybe $225,000. When that same home appreciates by 40%, now it’s worth $315,000, and another 25% boost would push it to $393,750, which is not enough to pay off those dual mortgages of $500K.
Some people struggle with math. They might think 40% plus 25% equals equity, and I am showing you the numbers so you can see it doesn’t work that way.
Second, the homeowners who were underwater and did not do a short sale and did not elect to grab cash for keys in a foreclosure, often chose the less painful of those options and selected a loan modification. Loan modifications — unless the bank forgave a big chunk of the principal balance — are generally just a temporary BandAid. They also tend to adjust after 5 years and interest rates go up, which increases the mortgage payment, until the homeowner gets to a point where she just can’t take it anymore or perhaps something else horrible happens, something worse, like a death in the family or loss of income or limb.
Naturally, since I represent sellers, I feel an affinity toward my clients — as well as a fiduciary responsibility, which is required by law. I try to help my sellers to choose an appropriate buyer for the home, a buyer who will wait for the approval and has the qualifications to close escrow. We keep our buyers informed throughout the transaction with weekly updates, and they can check updates themselves on my website.
Almost invariably, without fail, the person in the short sale that causes the most problems, the biggest delays, and is the main reason short sales drag on and on and on, is the buyer. They are just some person or couple who want to buy a house, and often possess no feelings for anybody in the transaction, sometimes, not even their own real estate agent. Yesterday, after battling FHA and surviving a transfer to an institutional lender, dealing with partial demands for previous loan mods, paying off utilities and other outstanding liens, cleaning up the preliminary title report and being on the verge of approval from the negotiator, a shiny new listing came on the market across the street from this short sale in Elk Grove.
The buyers lost the faith, which, granted, was probably hanging by a thread in the first place. Because the buyers didn’t adhere to all of our requirements upfront, that was a red flag, and against better judgment we gave them a chance. It was a risk we were willing to take. A risk that at least I regret. Don’t deviate, is my motto. This is what happens with deviation.
At least, on the bright side, all of the really hard work has been done, and the road has been paved for the next buyer who truly deserves this magnificent pool home in Elk Grove. If you’re looking for a home with 5 bedrooms and a pool at an excellent price, you should call your Elk Grove agent, Elizabeth Weintraub, at 916.233.6759.
