WAIT TIMES TO PURCHASE AFTER A FORECLOSURE, SHORT-SALE, AND BANKRUPTCY

In the ever-changing lending landscape, it is hard to keep up with what the ramifications are of a short sale or foreclosure on your future purchasing options.  In general, you must wait 7 years after a foreclosure, 4 years after a short sale, and 2-4 years after a bankruptcy in order to purchase a new home. However, there are more nuances to the process than that depending on what loan product you are using, which is explained in these charts.

There are also tax ramifications of both a foreclosure and short-sale, which is why it is critical to speak with an attorney and CPA well versed in Georgia law before considering either option. 

The IRS views unpaid debt -- including mortgages -- as income. Foreclosures are treated as the sale of property for federal tax purposes. Homeowners going through a foreclosure will need to calculate their gain or loss for tax purposes, as well as consider any income tax that might be due on the forgiveness or cancellation of debt. These are two separate issues: gain on the sale of the property and imputed income from any debt forgiveness. In official tax parlance, it's known as "cancellation of indebtedness income."  The Internal Revenue Service has a special section on its website for people who have lost their homes through foreclosure. The IRS also reminds homeowners that although mortgage workouts and foreclosures can have tax consequences, special relief provisions may reduce or eliminate the tax burdens for borrowers who lose their homes. This information is available at: http://www.irs.gov/  

Similarly, with a short-sale, after closing a homeowner will probably receive a 1099 in the mail from the sale of the home.  Regardless if the homeowner is fully released from the debt or not, the IRS considers this unpaid debt as extra income to the homeowner. Georgia law allows mortgage companies to pursue homeowners in court for a deficiency for unpaid debt.  So even if a homeowner completes a short sale, there is the possibility of legal action in the future for the mortgage company to try for more money, if the “demand letter” includes such verbiage.  HOWEVER - if the mortgage company sends a 1099 to the homeowner after closing, they have given up the right to sue for a deficiency.  The mortgage company either goes for recovery of the balance through a judgment or writes off the debt and sends a 1099.

Housing Showing Stable Pace in October

Great news! Housing indicators show ongoing strength as prices, housing starts, and future building permits continue to rise nationally. Georgia's statistics reflect the national trend. Housing indicators for Georgia for the month of October are as follows: 

• Median Prices rose 11% to $163,700       
• Average Prices rose 9% to $202,605       
• New Listings increased 4%
• Pending Sales increased 19%
• Closed Sales increased 9%  
• Inventory Levels increased 1.8% to 44,100   
• Months Supply of Homes for Sale decreased 5% to 5.7 months      
• Days on Market decreased 2.6% to 75 days
• Percent of Original Price Received decreased .5% to 93.9%     

It's a great time to sell! If you are considering a move, I would love to help!

Property Taxes

It's tax time in the Atlanta metro area.  Here are some details about how this part of the purchase process and home ownership works:

1.  All taxes are based on a fiscal year. The bill covers January 1 through December 31.
2. Once the tax bill is posted by the municipality it is a lien against the property and must be paid at or before closing.
3. The taxes are prorated on the closing statement.  The closing statement is proof for IRS purposes of the amount paid by each party.
4. When a lender sends a 1099 at the end of the year showing taxes paid, this amount usually does not include amounts paid at closing but only amounts paid out of the escrow account to the tax commissioner.  Buyers and sellers need to consider how taxes were handled at closing when filing taxes.
5. If the taxes are under appeal at the time of closing a “lesser” tax bill is issued. another bill may be mailed much later when the appeal is settled; it must be paid or it will be a lien on the property.  New owners should pay and then contact the Sellers for their share.
6.  The GAR Purchase & Sale Agreement contractually binds the parties to assist in re prorating taxes after closing. 

If you have any further questions about this, please don't hesitate to contact me!

New Guidelines for Purchasing a Home After a Foreclosure

Fannie Mae released new guidelines for the waiting period for purchasing a home after a short sale, foreclosure, and bankruptcy.  In general, it appears that in an effort to streamline the process, they have made all waiting periods 4 years, which in some cases is an improvement and in others is a diminishment.

Fannie Mae announced that on August 16, 2014, they will be changing the waiting period associated with the purchase of a new home after a short sale or a deed in lieu of foreclosure, from a minimum of two years, to four years.

Right now, there is a staggered waiting period that allows a homeowner to purchase a new home with a Fannie Mae conventional loan two years after the finalization of a short sale or deed in lieu of foreclosure. In order to that, the buyer must provide a 20% down payment on the purchase of the new home and have had clean credit since the event.

However, on August 16, 2014, the waiting period for a homeowner to purchase a new home after a foreclosure becomes four years. The good news though is that new home buyers will be allowed to follow standard Fannie Mae guidelines and put as little as a 5% down payment down on the purchase of a home after a short sale.

In addition, if a homeowner can prove that the short sale was due to an extenuating circumstance (loss of job and/or wages), then the waiting period may still be reduced to two years. However, unless a buyer has strong documentation of this, the two year exception cannot be counted on.

In addition, they changed the guidelines with regards to foreclosure after bankruptcy:

Fannie Mae Waives Waiting Period on Foreclosure after Bankruptcy...

Old Rule:

Foreclosure – 7 years waiting period in most cases.

New Rule:

If you filed Bankruptcy and included your home in the Bankruptcy - the new waiting period is just 4 years from the date of Bankruptcy discharge. Not only is this an improvement from the previous 7 year standard, in addition home buyers are no longer penalized for the bank’s delay in getting the title transferred to a new owner.

Effective immediately.

5 Ways To Boost Home Value Without Remodeling

Google “ways to boost home value” and you’ll quickly find millions of articles about remodeling projects that should increase your home’s value.

But what if you don’t need—or simply don’t want—to do any remodeling, but still want to boost your home’s value?

There are plenty of ways to give your home a little extra oomph in the price department, particularly if you are preparing to sell, without digging deep into your wallet.

1. Create more space

When first touring homes with my husband, we saw two homes with nearly identical square footage, yet the first one seemed much bigger than the second. The excessive decoration and oversized furniture made the second home seem almost half its size. While many serious buyers are savvy enough to realize that extra space is hiding inside your massive armoire, a cluttered and stuffed home can turn off buyers early in the process when they’re flipping through hundreds of home photos and seeing a dozen homes in a day. Without that foot traffic, your asking price will slip.

Limit bulky furniture in smaller spaces, and take out furniture you purchased that has since been proven unnecessary. Minimize décor, especially along any horizontal surfaces, so the buyer’s eyes are drawn to the house, not your stuff. It should also go without saying, make sure your home looks clean and organized.

2. Get an eye for staging

Just like decluttering your space can make it seem bigger, a few staging tricks can make it seem better cared for, nicer and more modern. Take home stager tips and apply them to your home at any time.

For example, if you are preparing to paint the walls, keep them neutral and focus on adding changeable color through accessories. Pick a focal point, such as a stunning painting or a coffee table with intricately-carved designs and build around that. Designate a theme or common element, whether it’s a color scheme, pattern or design, and thread it throughout a room.

3. Add curb appeal

This step doesn’t have to involve replacing siding or repaving the driveway; simply pruning your bushes, planting a few perennials and cleaning up your lawn can go a long way. This works similar to number one: The more appealing your home is on first glance, the more foot traffic, the more potential for offers, the better chance you have of selling your house at or above asking price. It’s that simple.

4. Touch up the little things

Fix up nicks in the wall; make sure paint lines look clean and even; fix that sticky drawer. Any little fix that makes your home operate smoothly is a wise investment of both time and money.

Savvy buyers frequently walk around a house and compile notes on all the little things that are wrong and factor those into the offer. Plus, they may assume the rest of the house isn’t up to snuff either, so stay on top of basic maintenance as well. You want buyers to see that you have taken care of the place, so they feel they’re getting a bigger bang for their buck.

5. Reinvent a room

Sure, you could finish your basement or convert your attic into a bedroom, but that would be expensive. Instead, consider simply reimagining a pre-existing space. According to a recent survey by Better Homes and Gardens Real Estate, one in five Millennials would prefer “home office” be used when describing the dining room because that’s how they would actually use it. This isn’t going to be true of all buyers, but it’s a good lesson in how turning away from traditional space designations can turn buyers onto your home.

If you don’t have a home office, make one in a space that’s starting to see cobwebs. Even finding an armoire with a fold-out desk or converting a large shelving unit or closet into a desk can create an office space and make buyers feel that not only is this home more spacious, it’s more functional.

By simply rethinking how your home looks and how you use it, you can increase your home’s value when you sell without spending the big bucks.

Posted on May 30, 2014 by Ilyce Glink