In Tucson with foreclosures on the increase the local realtors are finding an alternative in short sales. Lenders allow themselves to be persuaded by the borrower not to go for foreclosure when the price of the house is less than the mortgage dues but to allow a short sale. Lenders require documental proof from the borrowers about financial hardship. The lender pockets the sale amount and forgives the balance that is still due. In this way both sides benefit. The lender is spared the bad name of a foreclosure tag and the lender gets out of the time and money consuming hassles of foreclosure. If the lender had pursued the usual operation of foreclosure the loss would have been greater than in what is pocketed by a short sale.
Short sales have been on the rise since the last eight months. Special classes are being held for agents. It needs tact and patience to open a dialogue between stressed borrowers and suspicious lenders. The operation requires more time than in the case of an ordinary sale. In fact short sales are the current trend. Lenders are generally a stubborn group and not willing to talk about alternatives but now with so many foreclosures weighing them down with the additional burden of a falling property market, they are willing to see reason in short sales. Banks are far from eager to become landlords. They want money and not own non-performing bricks.
However borrowers have to think twice before going for a short sale. Apparently the idea of being forgiven a certain amount of the debt sounds good but the money that is saved is taken to be taxable income by the financial authorities. – The Internal Revenue Service. One saving clause is that the lender is not allowed to hold a lender accountable for paying more than the collateral. This gives coverage to most single-family houses and duplexes in Arizona. The owners of these units do not have to pay for excess debt. But in the case of refinancing this condition does not apply.
No matter what the options are the first thing is to contact the lender and not keep silent. An exit route is sure to open up. As another alternative one seller decided to hold her own auction to fight the stubborn market. But the results were far from satisfactory.
Today it is a buyer’s market with millions of houses slipping into foreclosure. It is the right time for those looking for profitable investment or an entry into a comfortable residence. But for this you need stamina and grit backed with ready cash.
Foreclosure numbers may be high but these are concentrated in few localities. In an auction the bids can be high. Then there is the big question mark about a property that cannot be inspected ahead. Are the copper wiring, brass taps and bathroom fixtures in place? The title too may be cloudy with money being owed to brokers, bankers and lawyers. So test the waters before wading in.
The rise in foreclosures does not automatically mean a rise in moneymaking opportunities. There is the occasional diamond in the shovel full of coal – but it needs either luck or a jeweler to spot it. It is not impossible but it is very difficult. Markets have not yet reached the bottom so that one can hope for the curve to rise again. It is still going down, down and down. So be sure that you’re trying to hold on to a falling star. It will just crash, make a hole and lose its shine.
With so many houses sitting on the shop shelves it is tempting to try one’s luck. Some have experience in real estate and development. Others join classes and seminars to get tips and hints. Some are making a get away while most are just sitting on investments.
Falling property prices is triggering off foreclosures, which leaves very little chances for refinancing. This year 355,624 houses have been foreclosed – the highest in the country since records are being maintained. The worst affected pockets of concentration are California, Florida, Illinois, Texas and New Jersey. Two to four million houses will be affected by the time the wave begins to subside.
Potential buyers get the housing details thorough banks or knowledgeable lawyers. Lenders want buyers and so they often outsource listings. To maximize profits they prefer professional dealers to those who are looking for a house to reside in. An investor sometimes gets a 50% discount on bulk buying of say 30 to 100 units. Those on MLS are not profitable. Pre-foreclosure sales are difficult to come by. All said and done – investing in properties is definitely not a part time job.
The foreclosure is a time consuming legal process. In North Carolina property can be foreclosed either through a trust-deed-sale or by judicial action. The latter is rarely applied. The mortgage consists of a document consisting of two parts. The deed of trust is the third part – it is between the borrower, lender and the trustee. The latter hold the title until loan is paid up. Usually the trustee belongs to the lender’s camp.
When the foreclosure ball starts to roll the lender sends a notice to the borrower granting 30 days time for paying dues. After expiry date the trustees file a notice of hearing at the Superior Court of the county in which the unit is located for a hearing date. The borrower must personally receive the notice well in advance. It contains the date, time and location of the hearing. The notice may be sent by ‘first-class mail, return receipt requested.’ If borrower is untraced then the notice is pasted on the property not less than 20 days before the date.
At the hearing the trustee has to prove validity of the debt, its default and that the lender has the right to foreclose. Also it must be shown that the notice was timely served to the proper person/place. The borrower has the right to contest any of the four points. If the court is satisfied then the foreclosure proceedings will be stalled. Otherwise the trustee will be directed to sell the unit. The latter then files a notice for sale and posts in the court 20 days in advance of the sale date. It is also published in a newspaper of the county once a week for two consecutive weeks. The notice is posted to the borrower. The specifications of the property and the date, time as well as the venue of the sale must be clearly stated.
The trustee conducts the sale by collecting deposit from the winning bidder and files first hand report of the sale within 5 days. The high bid is not closed for 10 days. With a fresh high bid another 10 days is added for another similar bid. During these 10 days the borrower may pay off past dues. With the receipt of the sale money the deal is closed and a final notification of the same has to be given to the court.
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The unforeseen waves of foreclosure that has been lashing all corners of the country has taken jumbo proportions causing disbalances in the entire socio-economic structure. The crisis has not been contained within the borrower-lender zone but has spilled onto Wall Street and subsequently the international markets. Big mortgage firms are closing shop. There is credit crunch. Loans are not available. Thousands of houses are being auctioned but there are not enough buyers. It all started with the sub-prime mortgage market going sour. The floating rates ballooned up. The borrowers just could not manage the exorbitant new rates. Coupled with this factor of increased interest were the usual headaches of unemployment, illness and divorce.
Internal Revenue Service has currently opened a special section on its website providing information about foreclosures. Many are not as yet aware that although mortgage negotiations regarding foreclosures carry a tax tag with it there are also special relief clauses, which often lessens the tax load. Sometimes it can be totally cancelled and waived.
The website (irs.gov) includes a worksheet with the help of which borrowers can avail of any of the related relief measures applicable to their foreclosure muddle. There is a special form for those who have to pay an additional tax. The form is a request for payment agreement with Internal Revenue Service. Often taxpayers may be able to come to a settlement in which the amount to be paid as taxes is cut down to half.
In a negotiation between lender and borrower if the value of the property is calculated to be less than the debt amount the difference or the amount saved is taken to be income and therefore taxable. But as per special rules the insolvent borrowers are allowed to show that their liabilities exceed their assets and therefore they are entitled to tax relief. But to qualify for this tax relief, the property under dispute has to be totally residential. If it is even partially used for business or rental purpose then the relief clause is inapplicable.
Borrowers should also take note that those whose debt has been reduced or totally waived should get a statement at the end of the year (form 1099-C) from the lender clearly stating the amount of the debt and the current and correct market rate of the property that has been foregone due to foreclosure.
Mori Hosseini, one of the big names in the world of land development being president of ICI Homes. The latter is one of the giant property developers dealing with projects coming up in the Volusia-Flager region and other localities. Hosseini has filed a foreclosure suit against another developer couple – Felix Amon and his wife Ursula. The tussle is over a large tract of land lying vacant near River Halifax, in South Daytona. Amon and Ursula stood guarantees for a debt taken by Madeira South LLC. The tie up is over ownership of land and controlling interest. The plot in dispute stands between U.S.1 and Palmetto Circle close to River Halifax. Madeira South had jumbo plans about developing the waterfront and building high-rise condos with towers, retail chains and a marina on the adjacent tract. But with the slump in the real estate the plans are as good as dead, says Felix Amon.
Hosseini filed his suit in the 7th Circuit Court in Del demanding back the loan of $6million together with interest and costs. The total amounts to something more than $7 million. Amon claims that he does not know about the lawsuit or about the fact that Hosseini owned the mortgage and the note on the land. The couple had met Hosseini only once and that too recently when the latter contacted them about taking control of the debt. Hitherto they had had no interaction with him.
Hosseini claims in his suit that Madeira South gave a $6 million promissory note to Nevada based Caliente Holding L.P. in March 2006. Few months ago Hosseini bought Caliente. He acquired the debt at a discount because the project had come to a premature halt. Looking at it from all angles Hosseini did not think that it was actually a discount. The note was now transferred to another Hosseini company named Madeira Recovery LLC on the day the suit was filed.
Another Amon firm, RX Realty Inc (operates RE/MAX Realty), has of late filed for bankruptcy protection from its creditors. It may be noted that RE/MAX Realty based in Daytona Beach is not related to any other agency with a similar name in this area.
The general picture from this imbroglio is that both small and big fish are getting caught in this net of foreclosures causing adverse reaction on the national economy.
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In September this year the number of foreclosures across the country doubled from what it was in August and marked a 36% rise from July. In August 243,947 foreclosures had been listed which showed a 115% rise from 113,300 foreclosures last year during the same month. In July 179,599 foreclosures were listed. The numbers have been released by a reliable online tracking agency – one of the pioneers in this particular field.
The National Association of Home Builders expects that the sale of houses will fall to an all time record low during the following six months. In September the index fell by 20 points – the 7th consecutive monthly decline. It is the same reading as that of January 1991 slump. The seasonal index average has remained below 50 since May last year. From March this year the fall has increased with each passing month.
The foreclosure process includes four steps. The filing numbers include all three of default, foreclosure and auction notices as well as the final one of bank repossession. If the owners have more than one mortgage then multiple notices might confuse the figures. Defaulting leads to a foreclosure notice. This is followed by auction and sale or repossession.
The month of August has the unique distinction of having the highest number of foreclosure filings made in a single month since records are being kept for the last two years. The August phenomena might well be the indicator for worse things to come. A large number of sub-prime rates are about to be reset and point to another bout of inclement weather. Bank repossessions jumped to 42,789 in August compared to 20,116 in the previous year. In July there were 26,842 bank takeovers.
Nation wise there has been one filing for every 510 houses. Missouri with 1:842 ranked 18th having 3.079 foreclosures. Kansas ranked 37th with 428 foreclosures and a ratio of 1:2,795. The figures are indicative of another fact – house sales are dropping. Instead of being sold off the units are reverting back to the lenders. The first rankers were Nevada, California and Florida.
The giants in the house building business met at an industry conference in New York with gloom written on their faces. They were gearing up to work under the pall of these negative conditions that are likely to continue for quite sometime in the future.
Via
Seminars on finding out profits from foreclosures are bringing in money. Three-day workshops teach such techniques. Seminars are held across the country. These are well-publicized events inviting people to hear how the course author Ann Goldschmidt made it in terms of dollars. These type of workshops promising quick cash always crop up in regular order following the cycle of bust or boom in the real estate market.
James Gripshover of San Diego has pocketed a tidy sum after having graduated from such an illuminating course. A job loss and bankruptcy made him take up investing in real estate business from 1997. He is no real estate license holder and yet he is a speaker at such seminars not failing to add of course that serious investors would have to put in serious effort.
Those who completed the course would be termed as foreclosure specialists – a designation not given recognition by the Californian state. These seminars are conducted by National Foreclosure Institute acting in conjunction with a Telligenix – a firm that markets similar courses. The instructors are supposed to be active investors in foreclosures. These fee-based programmes are part of a bigger educative operation trying to bring awareness to the people. But most of them do not meet up to the standards required for formal accreditation.
Among the various topics discussed are locating foreclosures, negotiating agreements, identifying investors, marketing skills, making contracts and finalizing sales. Some of the participants are skeptical whether the $3,000 fee would pay off on the practical field. Theoretically the lectures were very informative. Some of those who had joined were just idling around after having reset their own troubles and wishing to learn more about various options. The course showed strategies that could be worked out by distressed borrowers in a positive manner by making a small profit out of the mess. After the 24 hours of listening some have said that investing in foreclosures is not exactly their cup of tea.
Ralph Robert says that all the stuff discussed in seminars is available in the book he has authored. “Protect Yourself from Real Estate and Mortgage Fraud” is readily available at bookstores costing $100. Robert has attended such a course and is cynical about the whole show. If it were that easy then why instead of conducting the seminars the organizers not doing the work themselves.
