RealtyTrac recently released their Q1 2013 U.S. Foreclosure & Short Sales Report™. One of the more interesting revelations in the report was the decrease in the number of short sales being completed. According to the report, properties not in foreclosure that sold as short sales in the first quarter accounted for an estimated 15% of all residential sales. This is down 10% from the last quarter (4th quarter of 2012) and down 35% from the first quarter of 2012.
With home values falling dramatically from 2006 boom prices, many homeowners have found themselves in what is called a ‘negative equity’ or ‘underwater’ situation. This means the value of their home is currently less than the mortgage amount on that home.
Many of these homeowners have been ‘locked’ into their houses because they were unable to sell it without bringing cash to the closing table. The good news is this situation is improving as prices begin to rise.
Many analysts differ on what impact shadow inventory will have on house values in 2013. Some warn that these distressed properties will still play a major role in limiting appreciation. Others believe that the increases in buyer demand will more than offset the increase in supply. The only thing on which everyone agrees is that there will be millions of distressed properties that will need to be liquidated over the next few years.
“The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”
The act also applies to debt forgiven in a short sale. The big question is whether or not Congress will extend it past the December 31st deadline. Forty-one state attorneys general signed a letter urging Congressional leaders to extend the act. In the letter, it is explained:
For Agents’ Eyes Only…Each Thursday we will be posting a blog to help real estate professionals understand how they can better assist their buyers and sellers navigate the current real estate market. Hope you find the information helpful. – The KCM Crew
As an agent, it is crucially important that we ‘have the heart of a teacher’ and that we ‘build relationships’ not just do transactions.
CoreLogic, in their most recent foreclosure report, revealed that approximately 1.3 million homes, or 3.2 percent of all homes with a mortgage, were in the national foreclosure inventory as of August 2012 compared to 1.4 million, or 3.4 percent, in August 2011. Month-over-month, the national foreclosure inventory was unchanged from July 2012 to August 2012.
CoreLogic identifies foreclosure inventory as "the share of all mortgaged homes in any stage of the foreclosure process". Their report revealed that 32 of the 50 states have seen their percentage of foreclosure inventory decrease compared to last year. Though foreclosure inventory is slowly shrinking nationally, some states are headed in the opposite direction.
As the year winds down, we are getting more and more inquiries about the Mortgage Forgiveness Debt Relief Act of 2007 and whether or not it will be extended past its original expiration date of December 31, 2012. This is important as people who are selling their home through a short sale may be faced with a tax liability if they don’t close by the aforementioned date.
Here is the way the IRS explains the tax liability:
“If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
There are some things that are almost impossible to explain without a graphic or visual. With complex issues, the value of using visuals cannot be over-exaggerated. A study measuring the importance of using visuals by the University of Minnesota concluded:
Presentations using visual aids were found to be 43% more persuasive than unaided presentations.
There are many conflicting headlines in today’s housing market. A good graph or chart can go a long way to removing the doubt that these headlines create.