Published: November 12, 2012
Unless Congress extends the forgiven debt exemption, financially troubled home owners who short sell their homes to avoid foreclosure or otherwise have mortgages forgiven will get slammed with a huge tax bill in 2013.
The nation’s attorneys general worked hard to get the five biggest mortgage servicers to agree to a $25 billion settlement to help the nation’s financially troubled home owners avoid foreclosure.
The national mortgage settlement was intended to help stop the housing market spiral and hold the banks accountable for foreclosure abuses.
Now, a good portion of that money may end up in Uncle Sam’s bank account, wrenched from the depleted pocketbooks of those same troubled home owners in the form of income taxes.
The tax rub occurs because IRS rules say a debt you get to walk away from is really income, which as you know, is taxable.
Here’s an example of how you could get taxed on a short sale, where you sell your home for less than you owe on the mortgage:
Say you have a $100,000 mortgage on your house. You short sell your house and net $75,000 after sales expenses. You repay your lender that $75,000, creating $25,000 in forgiven debt.
The IRS will add that $25,000 to your taxable income. So if you have no deductions and you’re in a 28% tax bracket, you’d owe $7,000 ($25,000 x 0.28) in tax on that forgiven debt.
Up until the end of this year, you can escape that forgiven debt tax because Congress created an exemption for you back in 2009. Unfortunately, that exemption expires at the end of 2012.
If you qualify for a foreclosure avoidance program, like a short sale (or any of the other ways that reduce what you owe, below), but you can’t close your deal until 2013, you could face a huge tax bill. A tax bill large enough to put you right back into another financial tailspin.
Principal reduction: The lender shaves off a specific amount from what you owe on your mortgage.
Recasted mortgage: If the lender reduces what you owe overall to lower your monthly payment, that reduction would count as forgiven debt.
Second mortgage waivers: The bank says you no longer have to repay your second mortgage and just wipes out that loan.
Foreclosure: You’d be taxed on whatever is left on the mortgage that you didn’t pay.
Finally, any time you find yourself in a cash-out situation, such as a home equity line of credit, exercise care, because not all of it will be necessarily forgiven.
There’s not a soul in Congress who’s opposed to extending the forgiven debt exemption, but it still might not happen. With the federal budget in full-on crisis mode, any legislation that concerns a tax issue faces an uphill battle.
But wait. It gets worse. Traditionally, Congress lumps all the expiring tax provisions into a single bill. That bill is among the last things Congress passes before it goes home in December. That means the odds of Congress passing the forgiven debt extension by itself aren’t good. In the last 15 years, Congress has never passed a bill extending only one expiring tax provision.
Going through the foreclosure process is incredibly stressful, even if things work out OK in the end. Having to sell your home because you can’t afford it anymore is devastating. Having the IRS send you a tax bill for the forgiven debt? That’s just cruel.
Contact Linda Smith Here:
Fax: 419 352-2654
VM: 419-354-4871 ext.113
By: G. M. Filisko Published: October 15, 2010
Don’t let pet odors derail your home sale.
Air your house out. While you’re cleaning, throw open all the windows in your home to allow fresh air to circulate and sweep out unpleasant scents.
Once your house is free of pet odors, do what you can to keep the smells from returning. Crate your dog when you’re out or keep it outdoors. Limit the cat to one floor or room, if possible. Remove or replace pet bedding.
Scrub thoroughly. Scrub bare floors and walls soiled by pets with vinegar, wood floor cleaner, or an odor-neutralizing product, which you can purchase at a pet supply store for $10 to $25.
Try a 1:9 bleach-to-water solution on surfaces it won’t damage, like cement floors or walls.
Got a stubborn pet odors covering a large area? You may have to spend several hundred dollars to hire a service that specializes in hard-to-clean stains.
Wash your drapes and upholstery. Pet odors seep into fabrics. Launder, steam clean, or dry clean all your fabric window coverings. Steam clean upholstered furniture.
Either buy a steam cleaner designed to remove pet hair for around $200 and do the job yourself, or pay a pro. You’ll spend about $40 for an upholstered chair, $100 for a sofa, and $7 for each dining room chair if a pro does your cleaning.
Clean your carpets. Shampoo your carpets and rugs, or have professionals do the job for $25 to $50 per room, depending on their size and the level of filth embedded in them. The cleaner will try to sell you deodorizing treatments. You’ll know if you need to spend the extra money on those after the carpet dries and you have a friend perform a sniff test.
If deodorizing doesn’t remove the pet odor from your home, the carpets and padding will have to go. Once you tear them out, scrub the subfloor with vinegar or an odor-removing product, and install new padding and carpeting. Unless the smell is in the subfloor, in which case that goes next.
Paint, replace, or seal walls. When heavy-duty cleaners haven’t eradicated smells in drywall, plaster, or woodwork, add a fresh coat of paint or stain, or replace the drywall or wood altogether.
On brick and cement, apply a sealant appropriate for the surface for $25 to $100. That may smother and seal in the odor, keeping it from reemerging.
Place potpourri or scented candles in strategic locations. Put a bow on your deep clean with potpourri and scented candles. Don’t go overboard and turn off buyers sensitive to perfumes. Simply place a bowl of mild potpourri in your foyer to create a warm first impression, and add other mild scents to the kitchen and bathrooms.
Control ongoing urine smells. If your dog uses indoor pee pads, put down a new pad each time the dog goes. Throw them away outside in a trash can with a tight lid. Remove even clean pads from view before each showing.
Replace kitty litter daily, rather than scooping used litter clumps, and sweep up around the litter box. Hide the litter box before each showing.
Relocate pets. If your dog or cat has a best friend it can stay with while you’re selling your home (and you can stand to be separated from your pet), consider sending your pet on a temporary vacation. If pets have to stay, remove them from the house for showings and put away their dishes, towels, and toys.
G.M. Filisko is an attorney and award-winning writer whose former mutt Marley no doubt created a wet-dog aroma in her condo that still remains. A regular contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Contact Beth Ann here
Fax: 419 592-7021
Facebook’s IPO and subsequent stock value points up a simple truth: It’s easy to get caught up in the notion of getting rich quick. But there’s no surer way to wealth than home ownership.
As Facebook’s IPO (http://abcnews.go.com/Business/facebook-ipo-roadshow-poised-hit-road/story?id=16263419#.T6LGAZpYtXA) approached, it was easy to start traveling down the “what if” path:“What if I had equity in Facebook?!? How rich would I be?”
If my parents had only bought me Berkshire Hathaway stock for my first birthday in 1962, I’d have made some serious money in stock equities.
Alas, they didn’t recognize the hot stock of their era any more than I would recognize the hot stock of mine.
Like most Americans, it’s home equity (http://www.houselogic.com/home-advice/equity-loans/home-equity-line-tips/), not stock equity, that will pad my bank account when I hit the retirement finish line.
About two-thirds of Americans invest in home ownership (http://www.houselogic.com/home-topics/the-home-ownership-matters-blog/), but only half of us invest in stocks. (I suspect this is in no small part because we have to make our mortgage (http://www.houselogic.com/home-taxes-financing/home-loans-mortgages/) payments every month or the bank comes and takes our houses back.)
The fact is, more of us are getting rich by buying and paying off our homes than by picking the next Facebook.
Here are some interesting facts from the National Center for Real Estate Research:
•6 in 10 of us have more home equity than stock equity.
•One-fifth of Americans’ total net worth is home equity.
•Home owners accumulate, on average, $167,000 in their lifetimes, compared to $42,000 for renters.
•The median wealth for the poorest American home owners, those earning less than $20,000, is 81 times that of renters with similar income.
In a recent study that took into account falling home prices, buying was still more likely to generate wealth than renting, simply because renters are more inclined to spend instead of save and invest in stocks (http://kenhjohnson.com/tag/wealth-accumulation/#19_1).
The bottom line is this: Even if renting appears cheaper on a spreadsheet, the forced savings of home ownership leads to wealth more reliably than renting. Many of us simply don’t have the willpower or motivation to save our discretionary income and invest it in stocks.
So unless you’ve got the inside track on the next hot future IPO, keep making your mortgage payments.
What’s worth more right now, your
IRA or your home?
Call Susan Langendorfer Today
Fax: 419 891-1092
VM: 419-897-2700 ext. 229
Moving into your first home is exciting! But it also means you’ve got work to do.
When I bought my first house in May, my timing couldn’t have been better: The house closing was two weeks before the lease was up on my apartment. That meant I could take my time packing and moving, and I could get to know the new place before moving in.
I recruited family and friends to help me move (in exchange for a beer-and-pizza picnic on the floor) and, as a bonus, I got to pick their brains about what first-time home owners should know.
Their help was one of the best housewarming presents I could have gotten. And thanks to their expertise and a little Googling, here’s what I learned about what to do before moving in.
1. Change the locks. You really don’t know who else has keys to your home, so change the locks. That ensures you’re the only person who has access. Install new deadbolts yourself for as little as $10 per lock, or call a locksmith – if you supply the new locks, they typically charge about $20-$30 per lock for labor.
2. Check for plumbing leaks (http://www.houselogic.com/home-advice/plumbing/plumbing-leaks-8-smart-tips-stop-them/). Your home inspector should do this for you before closing, but it never hurts to double-check. I didn’t have any leaks to fix, but when checking my kitchen sink, I did discover the sink sprayer was broken. I replaced it for under $20.
Keep an eye out for dripping faucets and running toilets, and check your water heater (http://www.houselogic.com/home-advice/water-heaters/water-heater-maintenance/) for signs of a leak (http://www.houselogic.com/blog/plumbing/fix-a-leak-week-2012/).
Here’s a neat trick: Check your water meter at the beginning and end of a 2-hour window in which no water is being used in your house. If the reading is different, you have a leak.
3. Steam clean carpets (http://www.houselogic.com/home-advice/home-improvement/carpet-or-hardwood/). Do this before you move your furniture in, and your new home life will be off to a fresh, clean start. You can pay a professional carpet cleaning service – you’ll pay about $50 per room; most services require a minimum of about $100 before they’ll come out – or you can rent a steam cleaner for about $30 per day and do the work yourself. I was able to save some money by borrowing a steam cleaner from a friend.
4. Wipe out your cabinets. Another no-brainer before you move in your dishes and bathroom supplies. Make sure to wipe inside and out, preferably with a non-toxic cleaner (http://www.houselogic.com/green-living/green-cleaning/), and replace contact paper if necessary.
When I cleaned my kitchen cabinets (http://www.houselogic.com/home-topics/cabinets/), I found an unpleasant surprise: Mouse poop. Which leads me to my next tip …
5. Give critters the heave-ho. That includes mice, rats (http://www.houselogic.com/home-advice/pest-control/Need-to-Get-Rid-of-Rats-Its-a-Community-Effort/), bats (http://www.houselogic.com/home-advice/pest-control/attic-pest-removal/), termites (http://www.houselogic.com/home-advice/pest-control/detect-termites-other-wood-destroying-insects/), roaches (http://www.houselogic.com/home-advice/pest-control/roach-home-removal-tips/), and any other uninvited guests. There are any number of DIY ways to get rid of pests, but if you need to bring out the big guns, an initial visit from a pest removal service will run you $100-$300, followed by monthly or quarterly visits at about $50 each time.
For my mousy enemies, I strategically placed poison packets around the kitchen, and I haven’t found any carcasses or any more poop, so the droppings I found must have been old. I might owe a debt of gratitude to the snake (http://www.houselogic.com/blog/pest-control/how-help-snake-slither-out-your-house/) that lives under my back deck, but I prefer not to think about him.
6. Introduce yourself to your circuit breaker box and main water valve. My first experience with electrical wiring (http://www.houselogic.com/home-advice/electrical/when-time-for-electrical-wiring-upgrade/) was replacing a broken light fixture in a bathroom. After locating the breaker box, which is in my garage, I turned off the power to that bathroom so I wouldn’t electrocute myself.
It’s a good idea to figure out which fuses control what parts of your house and label them accordingly. This will take two people: One to stand in the room where the power is supposed to go off, the other to trip the fuses and yell, “Did that work? How about now?”
You’ll want to know how to turn off your main water valve if you have a plumbing emergency, if a hurricane (http://www.houselogic.com/protect-your-home/hurricanes/) or tornado (http://www.houselogic.com/protect-your-home/tornadoes-severe-storms/) is headed your way, or if you’re going out of town. Just locate the valve – it could be inside or outside your house – and turn the knob until it’s off. Test it by turning on any faucet in the house; no water should come out.
What were the first maintenance projects you did when you moved into your first home?
Article From BuyAndSell.HouseLogic.com
Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.
Buying a home can be emotional, but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.
Here are six tips for negotiating the best price on a home.
Getting prequalified for a mortgage proves to sellers that you’re serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they’ll go with buyers who are a sure financial bet, not those whose financing could flop.
Ask your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been other offers? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.
Know in advance the most you’re willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.
Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.
Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.
Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.
Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they may get nervous and accept your offer.
Great homes and those competitively priced can draw multiple offers in any market. Don’t let competition propel you to go beyond your predetermined price or agree to concessions-such as waiving an inspection-that aren’t in your best interest.
Determine how much mortgage you can afford (http://buyandsell.houselogic.com/articles/4-tips-determine-how-much-mortgage-you-can-afford/)
Keep your home purchase on track (http://buyandsell.houselogic.com/articles/keep-your-home-purchase-track/)
Plan for a stress-free home closing (http://buyandsell.houselogic.com/articles/7-steps-stress-free-home-closing/)
G.M. Filisko is an attorney and award-winning writer who has to remind herself to remain unemotional during negotiations. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Fax: 419 535-7571
VM: 419-539-2700 ext. 167
Visit Deon’s website, by going to wellesbowen.deondavis.com
From Realty Times -
Sometimes the terms “agent” and “realtor” are used interchangeably by people. These two terms mean very different things, though!
Let’s take a look at just what makes an agent a REALTOR® and how you can know which one is the right fit for you.
A real estate agent is a professional that helps people buy and sell houses and land. In order to legally do business as an agent a person must take a real estate licensing course and/or pass their state exam.
The Bureau of Labor Statistics says, “Real estate agents must have a license from the State in which they work. To get a license, a person must have graduated from high school. The person must be at least 18 years old and pass a written test. In some States, a person who wants to be a real estate agent must go to a special school for a few months.”
In reality, all REALTORS® and agents are licensed. What makes a Realtor different then? Today there are many real estate agents across the globe and more than 1 million are members of the NAR.
According to the National Association of REALTORS® (NAR), “The term “REALTOR®” is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and abides by its strict Code of Ethics.”
This code of ethics is what entices many customers to seek out a licensed REALTOR®. From pledging to protect and promote the interests of their clients to pledging to avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or transaction, they must follow certain standards in order to keep their membership.
Just because an agent isn’t part of the National Association of Realtors®, though, does not mean they won’t be a valuable and trustworthy asset in your home buying or selling process. Many agents across the country work as part-time agents or are new to the field and can’t afford dues to larger affiliations. These agents can be just as hardworking and ethical as the next.
To read the complete article click here
By Barry Stone, Tuesday, March 6, 2012.
DEAR BARRY: My son is buying his first home: an older house with an addition. Neither the seller nor the agent will say if the addition is permitted, but the agent assures him it was built to code. My son hired a home inspector who says the addition is not secured to the foundation. So now my son is wondering what to do next. What do you recommend? –Albert
DEAR ALBERT: Your son may not be dealing with trustworthy people, and it’s good that he discovered this before closing escrow. The main issues are:
1. Sellers who do not disclose a condition that would be of concern to a buyer, such as the permit status of an addition, may be acting unethically and in violation of state disclosure laws.
2. Agents who declare that an addition is “built to code” are claiming to be familiar with every aspect of the construction — foundations, framing, plumbing, electrical wiring, etc. They are also claiming to have a comprehensive knowledge of the building code, plumbing code, mechanical code, electrical code, etc.
3. Agents who refuse to disclose whether an addition is permitted are ethically suspect. Instead, an agent should advise clients to get the permit history of the property from the building department.
PLEASE CLICK HERE TO READ THE REST OF THIS ARTICLE.
According to Wikipedia the definition of a short sale is:
A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.
A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower; however both will often result in a negative credit report against the property owner.
What a short sale is not is a transaction short in transaction time, which some mistakenly assume “short” means.
Welles Bowen has several Short Sale Experts who can assist you in finding a short sale property. Certified Distressed Property Experts can also quickly assess a homeowners situation to see what might be the best possible course of action when homeowners have run into trouble with their home.
The best thing that a short sale buyer can do is to work with an agent who has experience with dealing with the short sale process. Call a Welles Bowen office today and ask for a short sale expert. Looking for a Short Sale Property, look in the menu above and click short sale for a list of current available properties.
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