Short sale sellers need to close in 2012

February 6, 2012

WASHINGTON Feb. 3, 2012 If a bank writes off debt in a short sale, it's a "taxable event," and the lender tells the Internal Revenue Service about the deal by submitting a "Form 1099-C, Cancellation of Debt" at the end of the year. Home sellers must acknowledge the amount when they fill out their federal taxes. Through Dec. 31, 2012, however, the federal government forgives any tax liability associated with forgiveness of a mortgage loan. "In general, homeowners believe the government will extend this tax provision," says San Diego Realtor Joy Bender. "However, as evidenced by the First Time Homebuyer Credit expiration in 2010, you can't always count on the government to bail you out." The government generally considers forgiven debt to be income. If a seller has signed legal loan papers to take out a $200,000 mortgage and the lender accepts $100,000 in a short sale, for example, the seller received the equivalent of $100,000 in free money by government estimates. As a result, the IRS taxes it. For tax year 2012, however, the government still forgives the debt; in 2013, it might not. The tax amount can be significant. On a debt of $100,000, a short-sale seller in the 25 percent tax bracket could end up owing $25,000 in income taxes. Since short sales can take months and even fall through, homeowners considering a short sale may want to start the process sooner rather than later. © 2012 Florida Realtors® Read more

Court complicates Fla. A.G.’s foreclosure probe

February 6, 2012

TALLAHASSEE, Fla. (AP) Feb. 3, 2012 An appellate court has denied a request from Florida's attorney general to allow further appeal of a decision that could have helped the state continue investigating fraudulent foreclosures. The 4th District Court of Appeal on Thursday ruled on its own previous decision in April. The court had said Attorney General Pam Bondi's office couldn't subpoena records of the now-closed Plantation-based Law Offices of David J. Stern to see if false or improper affidavits in foreclosures were filed and whether employees signed documents without reading them. The court now says its prior decision is not a "question of great public importance" reviewable by the Florida Supreme Court. A spokeswoman says Bondi now will review all seven pending investigations into law firms to determine how else to pursue foreclosure-related misconduct. Copyright © 2012 The Associated Press, James L. Rosica. Read more

Why Have Banks Really Tightened Lending Standards?

February 2, 2012

DAILY REAL ESTATE NEWS | MONDAY, JANUARY 30, 2012
Home ownership affordability is at a record high due to low home prices and all-time low mortgage rates. But housing experts have blamed banks' tightened lending standards for keeping more buyers on the sidelines because they are unable to qualify for financing.

Lending standards increased sharply after the financial crisis in 2008, and even after the recession ended in 2009. Lenders have yet to ease their stricter standards, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn.

Why? The researchers say it's mostly because there's less money available to lend.

"During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up," an article at MSNBC.com notes, in describing the study's findings. "That market has all but vanished; 90 percent of new mortgages written today are backed by the government."

Also, researchers found that lenders are swamped with more paperwork, which is also causing delays in processing. Many lenders have issued stricter documentation requirements before they'll approve a loan. Nowadays, nearly 90 percent of mortgage applications require "full documentation" before getting approved. From 2000 to 2006, less than 60 percent of applications required "full documentation," researchers found.

Source: "Tight-Fisted Mortgage Lenders Pressure Home Sales," MSNBC.com (Jan. 27, 2012)

Editor's Note: Another reason banks have tightened up their lending is because Fannie Mae and Freddie Mac are requiring banks to repurchase some of the loans they've made. As reported by Bloomberg News, banks don't want to get hit with more mandatory repurchases, so they have added "overlays" (such as minimum downpayment, debt ratio, etc.) to FHA, Fannie, and Freddie standards, and are only making the most Read more

Obama Extends Foreclosure Prevention Program Aid

February 2, 2012

DAILY REAL ESTATE NEWS | MONDAY, JANUARY 30, 2012
The Obama administration will be expanding eligibility requirements for its foreclosure prevention program, the Home Affordable Modification Program (HAMP), to help more struggling home owners participate.

The program will expand its eligibility requirements for those who may qualify for a loan modification, including how the debt ratio of mortgage borrowers is calculated as well as extending the program to owners of rental properties too.

HAMP will also triple the incentives it pays banks in order to get more banks to reduce the principal on loans, and it would offer incentives to Fannie Mae and Freddie Mac to reduce loan principals for those who participate in the program (previously only private lenders and banks were eligible for the incentives).

However, the Federal Housing Finance Agency, which oversees Freddie and Fannie, says that while it will consider the HAMP changes, in a recent analysis it found "that principal forgiveness did not provide benefits that were greater than principal forbearance" -- a possible sign the GSEs may not support reducing the mortgage principal on loans, housing experts speculate.

HAMP was first launched in 2009 and set out to help some 4 million struggling borrowers modify their loans, yet it has fallen short from its original goal. To date, HAMP has helped fewer than 1 million home owners.

Some housing experts are optimistic that the changes to HAMP will allow more home owners to take part in the program, and that HAMP will help more "responsible home owners lower their costs and stay in their homes," Gene Sperling, the director of the National Economic Council, at a press conference.

The new changes to the program will take effect at the end of April. Also, the program has been extended to December 2013.

Source: "Obama Administration Expands Foreclosure Prevention Program," Read more

10 Property Management Services You Can't Live Without

December 20, 2011

After writing the post about the benefits of hiring a property management service, it occurred to me that I hadn't included the actual services that property managers perform. So here goes:
Inspect the property and determine a market rental rate write up detailed documentation, including photos of the property, with interior and exterior shots

make suggestions as to appropriate repairs that will maximize potential rental rates

provide comps for market rental rates in the area

establish (with the owner) the rental policies such as pets, smoking etc.
Market the Property to perspective renters thoroughly clean the home, mow grass and touch up landscaping

provide signage in the yard

write ads that are tailored to the property through appropriate advertising venues

make other realtors aware that the property is available

field calls and questions regarding the property

meet potential tenants and show the property

provide all necessary documents for leasing and collection of rent compliant with existing law
Tenant Screening background check etc to verify information on the rental documents
Tenant Move In provide the move in inspection

collect 1st and last months rent and security deposit
Rent Collection and Eviction

Insure that rents are paid in full and on time

In the event of missed payments, begin eviction proceedings in accordance with the law
Inspections Perform scheduled inspections periodically to insure that the renter is taking appropriate care of the property
Maintenance and Repairs utilize an established maintenance schedule to identify any potential repair issues

provide and maintain a network of home repair professionals

outdoor maintenance

make recommendations for larger repair issues
Accounting and Reporting Provide accounting Read more

Why Use a Property Management Company Part 2

December 13, 2011

After thinking about the list of services in the previous post, I came up with a few more reasons to hire a property management firm than I discussed in my prior post. I hit the high points in the first post but there are still some benefits left that I didn't discuss that can also help to increase ROI.

So here goes....

Better Tenant Retention

High turnover can affect ROI. Obviously, it's more expensive to replace a tenant than to keep an existing one. The cleaning, painting, changing of locks etc. costs money before even considering the marketing costs associated with finding new renters.

Good property management companies have proven policies that improve tenant retention and can help keep them happier and content to stay where they are.

Lower Maintenance and Repair Costs

Good maintenance and repairs also help to keep tenants happy as well as preserve the valuation of the property. This is both a process and cost saving benefit. The process makes sure that routine maintenance is done in a timely manner and documented which helps to catch small problems before they become big ones; saving money in the long term.

And last but certainly not least...

Personal Benefits

Owners can experience much less stress when a property manager has to take the 3 am call from a tenant for an emergency or chasing down rent, scams, lousy vendors, and evictions. All this becomes a headache for the property manager instead of the owner.

Less time spent with all the routine paperwork required to maintain a property is another way we can reduce stress. All the owner need deal with is the month end report.

Property management is the only way to go for out-of-town owners. It would be impossible to maintain and stay on top of a property from a remote location. Or for that matter go on vacation without the potential disaster of an emergency. Read more

Why Use A Property Management Company

December 6, 2011

A good property management company can prove to be an asset to the continued success of your business. Many investors will say that the value added of a great property management company is like finding a pot of gold. We're a little biased but we have seen the proof over and over in our business because by freeing the owners from the day to day operations of the property, they have more time to explore other opportunities and think more strategically of how they want to manage all their investments. The result is a much better ROI, even with our fees.

Let's look at some specifics as to what a good property management company can do for you:

Higher Quality Tenants

Screening potential renters is a process that many investors simply don't have the time to go through. Rather than getting a bad tenant out of your home, the better scenario is to never let them rent in the first place. A thorough screening process results in reliable renters and can:

put less wear and tear on the unit

have better and easier on time rent collection

will generally attract tenants who will rent for longer periods of time

eliminate renters who are likely to cause problems over the term of their lease.

We do this by spending the time necessary to determine all the information potentially available for a client and analyzing that information for proven warning signs. A good property management company, not only finds reliable renters but also protects the owner from potential scams.

Shorter Vacancy Cycles

A property management firm should be able to decrease your vacancy cycles by:

Maintaining or improving property for rent

Knowing the market

Effective marketing for tenants

We know what potential renters are looking for because we do this everyday. We suggest improvements that can increase the value of the property to Read more