Foreclosure :: SoundBiteBlog.com

An article in today’s Wall Street Journal casts a dark cloud over recent optimism that the housing market, and US economy in general, is in recovery (to read the full article, go HERE).

According to the article, authored by James Hagerty and Sara Murray, new home starts were down 10.6% compared to last month. They also quote current foreclosure statistics from LPS Applied Analytics, a research firm in Denver that 3.4% of US households (or about 1.9 million homeowners) are 120 days or more overdue on their mortgage payments, but are not yet in foreclosure.

What this means is that even more bank-owned homes and short sales will be flooding the market over the next year, adding homes to many areas that already suffer from over-supply.

How this will affect the Kitsap County WA real estate market is any one’s guess. The past few months have seen a significant drop in the number of foreclosed homes, compared to numbers posted mid-Summer. In July, nearly 190 homes fell into foreclosure versus just over 60 in October.

With the recent extension of the $8000 1st-Time Home Buyers Federal Tax Credit until July 1, 2010, we should see continued activity and positive opportunities for this segment. In addition, a Repeat Buyers Tax Credit up to $6500 was also approved, providing added incentive for current homeowners (to read more about these recent tax credits, go HERE).

Obviously, the people most challenged will be those who need to relocate, but bought their homes at the peak of the market. With little or no equity, competing against dropping home valuations, and the pending increase of foreclosures, will make selling these homes difficult, to say the least.

If you find yourself in a difficult or challenging situation, give me a call and I’d be glad to assist you, and discuss available options (360-440-4758).

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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, ActiveRain, Crabbing in the Hood, Facebook, Twitter, or e-mail:  kitsapagent@gmail.com

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Posted in Foreclosure | 1 Comment »

Tags: $8000 1st time home buyers tax credit, foreclosure rate, foreclosures in kitsap county wa, Kitsap County WA real estate, market condition, repeat buyers tax credit, short sales

Another sign of the times appeared yesterday when Washington State’s Department of Revenue reversed it’s position on how and when it collects the Real Estate Excise Tax (REET) in real estate transactions involving a Short Sale.

A Short Sale is the name for a Real Estate transaction where a seller, heading into Foreclosure, agrees to sell his/her home for less than the amount of money  owed on the property. Short Sales are complicated transactions which must involve not only the Seller and the new Buyer, but the mortgage holder as well. In a Short Sale, the mortgage holder must also agree to accept a sale price that may be significantly below the amount owed on the property.

The difference between the amount owed and the amount generated by the sale, known as a deficiency balance, is sometimes “forgiven” (the seller is not required to pay the lender), and most times not forgiven (the seller still owes money after the sale to the original lender).

To add injustice to injury, before yesterday, the WA DOR imposed the Real Estate Excise Tax on the deficiency balance as well as the sale price. In other words, not only did someone lose their home while continuing to pay a mortgage lender, but the State of Washington taxed the homeowner on the amount of money still owed to the lender. (The IRS does something similar to this, but that is another story)

This practice changed yesterday when the Department of Revenue issued it’s reversal of previous policy in the Short Sales – Letter to Stakeholders. This letter explains that the DOR will no longer require Escrow Agents to collect the Real Estate Excise Tax on deficiency balances. It goes further to provide contact information for sellers who were charged the tax in the past.

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Posted in Foreclosure, Real Estate Bites, Sellers | 1 Comment »

Some tenants are better than others. Yet no matter how ethical a tenant might be, or how diligent in paying the monthly rent, even terrific tenants can get badly hurt by a foreclosure.

Landlords don’t usually discuss their financial problems with their renters. Why would they? If the property owner is falling behind on his/her mortgage payment, they fear that if the tenant finds out, the tenant might just follow suit and quit making the rent payment. And the landlord, headed for foreclosure,  needs money badly. Tenants of rental properties are often among the last to know about a pending foreclosure.

A landlord’s  foreclosure leaves a tenant in a precarious position and can potentially have a lasting effect on the tenant’s future ability to rent as well as throwing the tenant’s life into disarray while they scramble for housing unexpectedly. The scramble for a new home is a short-term problem. There are other pitfalls for renters, that can last for years beyond the foreclosure, and have a much more significant impact on the renter’s future.

When a lender “takes back” a home through foreclosure, the lender’s primary goal is to sell the property as quickly as possible. Empty properties are easier to sell than occupied properties. The lender, determined to sell quickly, must take steps to make the house as sell-able as possible. These steps often include emptying the house of it’s occupants. In other words, and eviction takes place. And here is where tenants can get hurt.

An eviction is a formal, legal action. Many legal actions are part of the Public Records. And Public Records are part of a Credit Report. So a tenant can end up with an Eviction on their Credit report! This can happen even if the tenant does not fight the eviction. Many lenders will “follow protocol” just to be sure future litigation cannot happen. Protocol in this case is a legal eviction. The lender, wishing to have a perfect “paper trail” of documents, can insist on following the letter of the law with regards to an eviction. They insist on following the process to it’s bitter end.

The ripple effects of the current mortgage market continue to surface in unexpected ways.  If you are a renter and find yourself in this unpleasant situation, document everything (make copies of any communications, and make written notes of any verbal conversations). You might want to consider speaking with legal counsel just to be safe. And make copies of all your rent checks (front and back) in case you ever need to prove that you made all your rent payments on time.

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Posted in Credit Bites, Foreclosure, Miscellaneous, Real Estate Bites | 3 Comments »

Tags: bremerton real estate, kitsap real estate, port orchard real estate, poulsbo real estate, silverdale real estate, washington state foreclosure

“Do you think its okay to help a client who wants to buy a new home now, so she can then let her current home be foreclosed on?”

This question was posed to me 2 weeks ago in a meeting at my office. The Loan Officer asking the question has been originating loans for many years. She’s a wonderful person, but suffering from a lack of business just like many other Loan Officers around the country. It was an unexpected meeting as we no longer work together. She just stopped in for a visit. We were catching up on each others lives, both professional and personal.

This was the first time I heard of a new form of Real Estate Fraud called “Buy and Bail”. The process goes like this. A homeowner, realizing that they have either no equity in their home, or worse yet, negative equity, attempts to buy a new home, with the intention of letting the old home go into foreclosure after the new transaction is complete. In order to pull this off, the homeowner often provides the lender with a Lease Agreement to artificially inflate their income so the homeowner can qualify for both mortgages at the same time.

After my initial “You’ve got to be kidding me” response, I asked some more questions, thinking maybe I had misunderstood the buyer’s intent. I hadn’t. This was a deliberate, planned attempt to get a new mortgage by misleading the new lender. The buyer had no intention of telling her new lender what she was planning.

This story is morally repugnant on so many levels, I don’t even know where to start. My first reaction was, “this client will have a difficult time finding real estate professionals willing to get involved”, then I found out the client already had a Real Estate Agent working for her, and the Agent was fully aware of what the client intended. The client also had engaged a willing Loan Officer to handle the new mortgage.

I told my friend simply, “If you have information about a transaction that you deliberately withhold from the lender, you are colluding in a deception”. I walked away, shaking my head, hoping she had heard me and would stay as far away from this transaction as she could.

A Wall Street Journal Article

Yesterday I was not surprised read an article in the WSJ, detailing an instance of this scam that is happening in California. The buyer not only thinks nothing is wrong with her plan, she has let herself be quoted in a major newspaper. Her Real Estate Agent’s quotes make it obvious the Agent sees nothing wrong with the plan either, calling it “a business decision”. I hate to state the obvious but “a business decision” to screw a lender, is not a good “business decision”. And any Agent who helps promote it puts themselves in legal harm’s way. The same goes for any Loan Officer who might get involved. And any appraiser (if they are privy to the plan). Not to mention the (probably ficticious) “renter” who signs the lease agreement.

Difficult economic situations, like we have in America today, are just that; difficult. It doesn’t give any of us the right to lie, cheat or steal to improve our own financial situation. Nobody forced this woman to buy a house in the first place. She bought a home, most likely, because she thought she would benefit financially. She made a decision, hoping to improve her personal situation. Now that she finds her decision has hurt her, she wants someone else to pay for a bad decision.

If you are a consumer, and have heard of this ploy as a possible way out of your negative equity, go talk to a lawyer as fast as you can. If you are a Loan Officer; run. And the same goes for any Real Estate Agent who might read this article. Contact your brokerage’s attorney before getting involved. This isn’t the newest opportunity in real estate, this is dangerous territory.

Related Articles

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A Sacramento Blog (read the comments on this one)

Bloomberg – FBI diverts agents to investigate mortgage fraud

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Posted in Buyers, Foreclosure, Kitsap County Bites, Miscellaneous, Real Estate Bites | 7 Comments »

Tags: buy and bail, ethics, real estate fraud

Life can be overwhelming at times. It happens to us all. There’s information overload, the mounting costs of everything from gasoline to college educations, the internet explosion, health care cost increases, international strife, the whole political tennis match, FHA reform, rising foreclosure estimates in America and the day-to-day business of living while raising families. Have you tried to help your children with their homework lately? It’s no wonder many Americans consider “letting the house go back to the bank” as a viable solution to the ever-present stress of living life.

As a solution to debt problems, Foreclosure may not provide the financial relief some homeowners are seeking. Rather than ending up with a more managable budget after foreclosure, many consumers are horrified to find they must still make payments to a lender on a home they no longer own. The problem didn’t get better, it got worse.

Homeowners with significant equity in their homes tend to fight vigorously to save them. Homeowners who believe they have little to lose in equity, are more apt to “throw in the towel” when financial times get tough. These homeowners often get hurt the worst. And its not uncommon.

A deficiency balance occurs when the proceeds of the sale are insufficient to cover all the costs associated with the property being sold. First, there is the mortgage (sometimes there are more than one). Then there are late fees, attorney fees, court cost and any penalties that were assessed during the Foreclosure process. Sometimes there are back taxes that must be paid and unpaid utility bills. Once all these amounts are added up, they often exceed the amount of money generated by the sale of the property by tens of thousands of dollars. Now the homeowner is a renter with a huge liability owed on a home they no longer own as well as the cost of rental housing.

One of the hardest things for any of us to do is to keep a clear head while under financial pressure. It is the one time we can ill afford to make a poor decision. A decision to allow a home to be foreclosed that results in this scenario, does nothing to alleviate the stress a homeowner with financial trouble is under. It just prolongs the misery. Think twice before “throwing in the towel”. Is there ANY other way to work your way out of this tight spot?

To make matters even worse, if the Lender decides to “Forgive” the deficiency balance, don’t be surprised if the IRS labels this as Income and demands taxes on the money. They have done it many times in the past.

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Posted in Bites of Washington, Credit Bites, Foreclosure, Miscellaneous, Mortgage Bites | 5 Comments »

Tags: Foreclosure, kitsap real estate, washington state foreclosure