Ten Facts for Mortgage Debt Forgiveness

As real estate professionals we are constantly asked by home sellers what's going on with the Debt Forgiveness Relief Act that is sunsetting on Dec 31st 2012.  

Well if we believe in the mayan calender its all mute really :-). But without any major changes on the horizon sellers should look at the facts now, not at what might be happening when they decide to short sale their home.  With that in mind I wanted to shre these great tips and Ten Facts for Mortgage Debt Forgiveness

IRS Tax Tip 2011-44,

If you are a homeowner whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income.

Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

   1.  Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

   2.  The limit is $1 million for a married person filing a separate return.

   3.  You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

   4.  To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

   5.  Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

   6.  Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

   7.   If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

   8.  Debt forgiven on second homes, rental property, business property, credit cards or car loans do not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

   9.  If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

   10.  Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit http://www.irs.gov.  A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.

You can also use the Interactive Tax Assistant available on the IRS website to determine if the cancellation of debt is taxable. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions

Taxpayers may obtain copies of IRS publications and forms either by downloading them from http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Thanks for stopping by nd reading and commenting on my blog: Ten Facts for Mortgage Debt Forgiveness

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This Active Rain post is by Mark Taylor, to get your free mortgage approval please call 602-361-0707. Please click on the links below to view my AWESOME websites!

Mark Taylor | Arizona Home Loans | Blarming | Will You Listen to Me | Arizona Short Sales | Arizona Foreclosures | Arizona FHA Loans | Arizona USDA Loans | Arizona HUD Homes | Ariona VA Loans | Fix My Broken Credit | Arizona Mortgage | AZ Short Sale Help

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Sometimes you provide advice to friends and relatives and never know if they wanted it or not. 

Last night I was out playing cards with friends, one of whom is going to sell her home in a few months.  About three weeks ago we talked about her hiring an agent and I stressed the importance of interviewing two or three and finding out some answers to, what I believe, are important questions.  I told my friend that the internet is now the biggest screening tool that Buyers use for deciding to see a home.  I also said that some Buyers have purchased homes (usually from overseas) without ever stepping foot in the home.  It is all based on the photos and videos.  Given the importance of good photos and videos, I suggested that she ask each agent:

• Who takes the photos that will be used in the listing?  
• Will there be video?
• How many photos will be used?
• Do I, the Seller, have a say in which photos will be used?  
• Where will the photos be posted (websites)?

Last night she told me the story of Agent Zero.  When asked the above questions, the agent told her:  

• I take the photos with my little camera.  
• I never use video.  
• I like to post two or three photos just to tease people to come see the house.  
• I pick the photos.  
• I only use the local real estate board site.

Sometimes you have to play the cards you are dealt and sometimes, as was the case with my friend, you can be a strategic and savvy player and pass on the hand someone else is holding.  

 

She passed on the agent's trick.

 

Photo credit:  Ace of Spades Card Trick Macro 10-19-09-02

Valerie Zinger  

valeriezinger@gmail.com 

613-859-7759

  

Real Estate Recovery or Not?
2012 Predictions By the Pro’s Infographic

Data, data everywhere, but what should you believe?  Are we on, in the middle, or at the tail of a deflating real estate bubble?  Is there a Florida real estate bubble?

There is A LOT of conflicting data emerging about the 2012 real estate market and 2012 real estate transactions.  Case-Shiller has emerged as the leading index of real estate values.  The Q4 2011 S&P/Case-Shiller index (1) shows continuing declines in real estate values with quarter over quarter declines of 1.1-1.2% and annual declines of 3.0-3.4%.   RealtyTrac is the leading source of foreclosure data.   On January 12, 2012, RealtyTrac published (2) surprisingly good news showing a 33% decline in the number of homes in foreclosure from 2010 to 2011.   The National Association of Realtors (NAR) Chief Economist Lawrence is projecting a modest 4.7% increase in real estate transactions with a 2.0% increase in real estate values in 2012 vs. 2011.  But, on December 19, 2011, NAR was forced to re-state historical homes sold data (3) due to “upward drift” of their core homes sold benchmarks, which historically have been based on feeds from the multiple listing service (MLS).

So what should you believe?  Nearly all data on real estate transactions and real estate values is historical;  it does not forecast the future and may not reflect the situation in your local market.   Real estate is inherently local, so if the national real estate market is in decline or on the mend, what does that say about your local market?  Does a national real estate bubble portend a Florida real estate bubble? Or a bubble in Fort Myers, or Sanibel Island specifically.

The largest real estate social network ActiveRain Corp surveyed 1,835 real estate agents and real estate brokers in the US and Canada to understand if the real estate market and economy are poised for recovery in 2012, both nationwide and in local markets.

(Click above for high resolution image)

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<p><a href="http://activerain.com/real-estate-values"><img src="http://activerain.com/pdf/FINALhotornot_600px.jpg" height="800" alt="" width="375" /></a></p> <p>Data provided by ActiveRain.com. Join 215,590 <a href="http://activerain.com/real-estate-value">Real Estate Agents</a> on the world's largest Real Estate Social Network.</p>

A Bottom of the American Real Estate Market

American real estate agents expect the US real estate market to be largely flat from 2011 to 2012.  Real estate agents predict that real estate values will be flat from 2011 to 2012, signaling a bottom to the real estate market or the end of the real estate bubble.  Given historically low interest rates as well as a bottoming of real estate values, real estate agents expect that the number of real estate transactions and new construction starts will increase slightly in 2012.   Additionally, real estate agents believe local economies are on the mend and we will see improvements in the economy.

Rental Nation?

With low real estate values, low interest rates and a recovering economy, American real estate agents believe that 2012 is a great time to purchase both single family and multi-family rental properties.  Real estate agents feel that single family homes and luxury homes represent great investment opportunities.   What did real estate agents think are the worst opportunities in the 2012 real estate market?  Due to the glut of inventory in the real estate market due to short-sales and foreclosures, new construction condominiums, new construction single family homes, and land for construction were rated as the worst investment opportunities.

What’s the Problem?  The Banks, Stupid!

When polled about the biggest challenges facing the real estate market and economy, real estate agents rated bank related issues the highest.  The biggest challenges were:  1) short sales, 2) ability to finance a new home purchase / loan qualifications, and 3) foreclosures.  The significant shadow inventory caused by short sales and foreclosures continues to drag on real estate values.  Though interest rates are at historical lows, increased loan qualifications are preventing first time home buyers from purchasing homes and current home owners from trading up into new homes.

We would have expected unemployment to be a greater concern to real estate agent.s  Persistently high unemployment was ONLY the fourth concern to real estate agents, which was surprising given how the poor economy and lack of jobs has dominated the news headlines for the past 24 months.

Local Opportunities, Local Problems

From a local market perspective, the 2012 ActiveRain real estate survey shows markets where real estate agents are significantly more optimistic and others in which real estate agents are concerned about 2012.  Based on our survey data, the ActiveRain real estate network has created a real estate confidence index and ranked the top real estate markets. 

Below is a list of the TOP 10 and BOTTOM 10 real estate markets ranked by real estate agent confidence.

See real estate confidence in your local real estate market.

Key Trends in Top Markets

Low Cost of Living Markets Rule: Low interest rates and low cost of living have attracted buyers and relocations back into these markets.  Even though the general economy is not as robust as anyone would like, home buyers are adjusting lifestyles to find markets with low cost of living and reasonable housing prices.   Applicable markets: Ft. Myers, Austin, Boise, San Antonio, Denver, Dallas, Nashville, Houston, Salt Lake City

Invasion of the Snowbirds: Senior Housing & Second Homes:  Seniors and those planning for retirement have returned to the South.  Seniors are taking advantage of low priced housing inventory in the Sun Belt and low interest rates to buy a retirement home or a second home in a warmer climate.  Many of these buyers have saved for lifetime and 2012 represents a great opportunity to buy while prices and interest rates are low.   Seniors are targeting markets with low cost of living for retirement. Applicable Markets:  Ft Myers, Austin, San Antonio, Nashville, Miami, Salt Lake City

International Buyers:  International home buyers are taking advantage of a weak dollar and low real estate values.  Florida is the biggest beneficiary of international buyer interest.  Miami is reporting strong home purchase market based on International cash transactions.

Deep in the Heart of Texas: No other state has FOUR major cities listed as growth markets.  So what is going on in Texas?  Texas represents exactly what every home buyer should be looking for: low cost of living, low cost housing, and job growth.   Throw in no state income tax and Texas is looking a lot more appealing than California.  Texas is attracting many large corporations to set up headquarters and operations in the state.   This is especially true in Austin.  Finally Texas has a great mix of technology companies AND energy companies (oil & gas and renewable energy).  See below.  Applicable Markets: Austin, Dallas, San Antonio, Houston

Technology and Energy Industries: Even in the current down market, technology and energy are growth industries driving job creation.  Though most think of San Francisco, Boston, New York and Seattle when we think of technology.  Secondary markets participating in technology and energy job growth are likely good real estate markets in 2012, due to low cost of living and high demand for skilled jobs.   Markets: Austin, San Antonio, Denver, Dallas, Houston, Salt Lake City  

Investment Property: Low interest rates, low real estate values, and rising rents due to job growth is a great investment proposition.  A number of the lower cost of living and lower real estate value markets are reporting growth driven by investors coming into the market looking for deals.   Applicable Markets: Boise, Nashville, Salt Lake City, Austin, San Antonio

Key Trends in Poor Markets

High Cost of Living, High Real Estate Values: Though interest rates are historicly low, cities with expensive housing and high costs of living are suffering.  Tightened loan standards are preventing home buyers from entering the market.  Families are relocating to lower cost of living markets.  The high cities with high real estate values are also suffering the most from the shadow inventory of foreclosures and short sales.  Applicable markets: New York, Los Angeles, Chicago, San Diego


California: Californian cities benefited from the greatest price increases during the real estate bubble.  Simultaneously California has suffered the greatest in the downturn with the highest numbers of foreclosures and short sales in the country.  California is also facing a major budget deficit of $XBn leading to reductions in government services, increased class sizes and increased taxes. Applicable markets: Los Angeles, San Diego, Sacramento

High Shadow Inventory:  Large numbers of foreclosures and short sales continue to depress real estate prices in many markets.  It will take several more years for many markets to stabilize.  Buyers continue to wait on the sideline for conditions to improve.  Applicable markets: Reno, Sacramento, Chicago, Springfield, Los Angeles, Philadelphia

High Unemployment:  Persistently high unemployment without an economic catalyst is preventing home buyers from entering the market and locking sellers into their current homes.  Applicable markets: Philadelphia, Los Angeles, New York, Chicago, Sacramento, Reno

Reliance on the Finance Industry:  Downsizing in the banking industry combined with reduction in Wall Street bonuses has caused challenges in markets reliant on banking,   Wall Street layoffs and a lack luster stock market have affected the highest cost markets like NYC most directly.  Applicable markets: New York , Chicago, Los Angeles, Philadelphia

O Canada!

Unlike the United States, Canadian real estate agents are fairly optimistic about 2012.  Canadian real estate agents believe that all core metrics of the Canadian real estate market and economy will be increasing in 2012.  Real estate values, real estate transactions, new construction starts, and the local economy are project to increase slightly in 2012.  Canada continues to have a strong banking system, a strong dollar, and low unemployment.  Interest rates are low, spurring international investment in Canada..  Canadian confidence continues to be high.  Job growth is being driven by the energy industry in Canada.

Few problems are facing the Canadian real estate market or the Canadian economy.  Inflation and gas prices are the only problems that the Canadian economy seems to be facing.  Unlike the US real estate market, Canada any issues with short sales or foreclosures.

Canadian real estate agents feel like single family homes, investment properties for rental and condominiums all represent good investment opportunities, due to historically low interest rates.  Interestingly, Canadian real estate agents are slightly LESS optimistic about real estate as investment opportunity when compared to American real estate agents

ActiveRain Corp is the world's largest network of real estate professionals.  ActiveRain is a social network, blogging and training platform built for real estate professionals, including real estate agents, real estate brokers, lenders, mortgage brokers, title companies, home inspectors, architects, home stages, and contractors.  ActiveRain receives more than 2 million real estate visitors per month.   For more information, sign up for a FREE account on ActiveRain here.

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(1) Q4 2011 S&P/Case-Shiller index

(2) RealtyTrac 2011 Year End Foreclosure Report

(3) NAR Re-Benchmarking of Home Sales

 

 

 

I had a listing presentation this week. This was a good old fashioned equity seller....remember those? The ones who really cared about what the sales price turned out to be? I love those.

The seller has owned the house for over 15 years; that's a lifetime when it comes to real estate markets. Naturally he had a lot of questions about how to effectively sell his Mission Viejo home.

"How agressive are you in your representation?"

Not that unusual of a question. Buyers and sellers both want to know that their agent is going to represent them and their financial interests to the fullest extent.

Absolutely!

But the term aggressive has started to bother me. In fact, although I used to use this term quite a bit, I no longer use it to describe myself. I am tough....and firm...but aggressive? Not sure! That's a negative word in my book. More and more I'm seeing aggressive agents trying to prove something to either themselves or their clients. And I'm finding that this is becoming an obstacle.

Rather than marching into situations with guns blazing, problem solving as a professtional is a much better option!

In my listing presentation, I answered this question by discussing the different types of situations we face in real estate today...and how I would handle them. There is no reason to assume a "them against us" posture, we are all trying to piece together a win-win proposition, if we are doing it right. There are reasonable requests and users out there....a professional can help a Mission Viejo Buyer or Seller determine which of these they are dealing with, and how to respond.

I'm not a Pitbull...I'm a professional real estate agent who will carefully watch your interests to get to the best possible outcome for you. Then the final decision is yours. That's what you should be looking for in a Mission Viejo Real Estate Agent, in my opinion. The Pitbull Agent is more likely to alienate the other party and cause them to dig in their heels....which normally results in getting less than you might have otherwise.

 

 

 Karen Fiddler
Broker/Associate
The Fiddler Realty Team/eVantage Real Estate
Lic # 01494165

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