A short-term IRS program that ignores lender-forgiven mortgage debt ends Dec. 31; if you need to short sale your home, you should consider listing now!

You may owe federal income taxes in 2013 if you have a short sale, foreclosure after this year. Now is the time to make the hard decision: Are you going to walk away from your underwater home?

Uncle Sam is still giving homeowners until Dec. 31, 2012, to go through a short sale or foreclosure without tax consequences – as long as the lender officially releases the debt.

But on Jan. 1, 2013, the rules change: The amount a lender forgives, ether in a short sale or foreclosure, on a primary residence will be taxable on federal income taxes.

If a bank writes off debt in a short sale, it’s a “taxable event,” and the lender tells the Internal Revenue Service about the deal by submitting a “Form 1099-C, Cancellation of Debt” at the end of the year. Home sellers must acknowledge the amount when they fill out their federal taxes.

So if a house sold $50,000 short of what is owed on the mortgage, then the selling homeowners will owe federal income taxes on that $50,000. Homeowners would owe $12,500 if they’re in the 25 percent bracket; $7,500 if in the 15 percent tax section.

Homeowners would be on the hook even if the house sold but the bank had not formally forgiven the loan in a letter: The banks must officially sign off in writing before Dec. 31.

“It’s a huge issue – it will be a shock to many taxpayers after 2012,” said Mark Steber, the Florida-based chief tax officer for Jackson Hewitt Tax Service.

The law first came into affect five years ago as the housing market went bust nationwide.

The Mortgage Debt Relief Act of 2007 “generally allows taxpayers to exclude income from the discharge of debt on their principal residence,” according to the Internal Revenue Service. “Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

Up to $2 million of forgiven debt can be forgiven this year, $1 million if married and filing separately, according to the IRS.

Homeowners declaring bankruptcy could escape paying income taxes on any cancellation of debt income if the debt is forgiven in the bankruptcy even if the debtor is solvent, said Nick Jovanovich, a board-certified tax attorney in Fort Lauderdale, Fla.

“Bankruptcy trumps everything,” he said.

Or homeowners might not have to pay income taxes on any cancellation of debt income to the extent that they are insolvent immediately before the cancellation – that is, their debts exceed the value of their assets, Jovanovich added.

Steber and Jovanovich said homeowners should decide now what they are going to do – to give themselves time.

Are you considerung a short sale? Contact us today for a consultation:

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Here is an excerpt of an interesting article from the Bradenton Herald on this topic:

The big banks are back in the foreclosure business.

 After a year of fewer foreclosures, as bankers reeled from revelations that they were falsifying documents in foreclosure cases, the latest monthly numbers suggest banks are starting to repossess houses again.

In October, foreclosure actions rose 44 percent from the month before in Charlotte County, 20 percent in Sarasota County, 37 percent for Florida and 7 percent for the country as a whole, according to data from RealtyTrac, an Irvine, Calif., market research firm.

Only Manatee County bucked the state and national trend. Its foreclosure actions fell 25 percent from September.

The overall rise in foreclosures was welcomed by real estate agents who have been frustrated by what they view as artificial supply shortages in the face of strong investor demand. But if foreclosure filings keep increasing in the coming months — as expected — it could drive home prices down again and may make it even more difficult for non-distressed owners to sell.

What could make the situation worse before it gets better, experts say, is an increasing number of underwater homeowners don’t see the point of struggling any longer.

“People are worn out and the stigma tied to foreclosure is gone,” Shari Olefson, an attorney with Fowler White and author of “Foreclosure Nation: Mortgaging the American Dream.” “At cocktails they are no longer embarrassed if they have stopped paying, they are embarrassed if they are still paying. And they are being empowered by the Occupy Wall Street movement.”

For the time being, real estate agents are glad fresh supplies of foreclosures are coming on the market.

Court records show that the 10 largest lenders in Sarasota and Manatee counties filed 591 early-stage, or lis pendens, actions in October — a 32 percent increase from the 447 filed in September.

Bank of America — the owner of Countrywide — led the way with 170 early-stage filings, compared with 118 the month before.

At the same time, short sales — in which banks permit owners to sell properties for less than they owe on their mortgages — also are on the upswing.

Across the country, 230,678 foreclosure actions were filed in October, a 7 percent increase from the previous month, but still down nearly 31 percent from October 2011.

Nevada, California, Arizona and Florida posted the top state foreclosure rates.

One in every 180 Nevada housing units had a foreclosure filing during October — more than three times the national average.

California came in second with one out of every 243 housing units. Arizona was third with one out every 259 and Florida was fourth with one out of every 268.

Read the full story

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The limited time offer has received little promotion from the Charlotte, N.C.-based bank, which sent emails to select Florida Realtors earlier this week outlining basic details of the plan. Only homeowners whose short sales are submitted for approval to Bank of America before Nov. 30 will qualify. The homes must have no offers on them already and the closing must occur before Aug. 31, 2012.

A short sale is when a bank agrees to accept a lower sales price on a home than what the borrower owes on the loan. Realtors said the Bank of America plan, which has a minimum payout amount of $5,000, is a genuine incentive to struggling homeowners who may otherwise fall into Florida’s foreclosure abyss. The current timeline to foreclosure in Florida is an average of 676 days – nearly two years – according to real estate analysis company RealtyTrac. The national average foreclosure timeline is 318 days.

“I think this is a positive sign that the bank is being creative to try and help homeowners and get things moving,” said Paul Baltrun, who works with real estate and mortgages at the Law Office of Paul A. Krasker in West Palm Beach. “With real estate attorneys handling these cases, you’re talking two, three, four years before there’s going to be a resolution in a foreclosure.”

Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance, called the short sale payout a “bribe.” “You can call it a relocation fee, but it’s basically a bribe to make sure the borrower leaves the house in good condition and in an orderly fashion,” Cecala said. “It makes good business sense considering you may have to put $20,000 into a foreclosed home to fix it up.” Homeowners, especially ones who feel cheated by the bank, have been known to steal appliances and other fixtures, or damage the home.

A spokesman for Bank of America said the program is being tested in Florida, and if successful, could be expanded to other states.

Wells Fargo and J.P. Morgan Chase have similar short sale programs, sometimes called “cash for keys.” Wells Fargo spokesman Jason Menke said his company offers up to $20,000 on eligible short sales that are left in “broom swept” condition. Although the program is not advertised, deals are mostly made on homes in states with lengthy foreclosure timelines, he said. And caveats exist. The Wells Fargo short sale incentive is only good on first lien loans that it owns, which is about 20 percent of its total portfolio.

Bank of America’s plan excludes Ginnie Mae, Federal Housing Administration and VA loans. Similar to the federal Home Affordable Foreclosure Alternatives program, or HAFA, which offers $3,000 in relocation assistance, the Bank of America program may also waive a homeowner’s deficiency judgment at closing. A deficiency judgment in a short sale is basically the difference between what the house sells for and what is still owed on the loan.

HAFA, which began in April 2010, has seen limited success with just 15,531 short sales completed nationwide through August.

If you need to short sale your home, please call us today @ 941.866.1666 for a free consultation.

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If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

If you are interested in selling your home please call us today at 941.866.1666 to set up a free consultation.

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The high inventory of foreclosures on the market is making it difficult for sellers to compete against these ultra-low prices. Therefore, “listing your home for less than comparable ones in your neighborhood is the best way of unloading it as quickly as possible,” according to the article.

You could even attract a bidding war which might even lead to a higher sales price.

Furthermore, it may take the property a lot less time to sell. A home underpriced by 10 percent may sell in a few days rather than in the average four months.

If you are interested in selling your home, please give us a call at 941.866.1666. Together we will find the right strategy for you to get your home sold.

“Despite extraordinarily tight credit conditions for purchasing a second home, the market share for vacation and investment homes held steady,” says NAR Chief Economist Lawrence Yun. “A sizeable number of buyers made deals with all-cash offerings.”

All-cash purchases have become prevalent in the second-home market in recent years: 59 percent of investment buyers paid cash in 2010, as did 36 percent of vacation-home buyers.

Especially international buyers tend to pay cash for their vacation or investment homes.

If you are interested in selling your home, make sure to use a Real Estate Brokerage who knows how to market your home to out of state and international buyers.

Call us today @ 941.866.1666.

“Good borrowers with one or two blemishes on their credit are being denied credit,” says Lawrence Yun, the chief economist for the National Association of Realtors®.

Lenders are now requiring higher credit scores and downpayments that have kept more homebuyers out, experts say. For example, the median downpayment to buy a home nowadays is about 15 percent; during the housing boom, it was nearly zero.

So today more than ever it is great to have a cash buyer – no need to worry about appraisals or credit scores. But where do you find that cash buyer?

Studies show that about 80% of all international buyers pay cash for their second homes. Make sure to use a Real Estate agent who really knows where to market your home to attract those cash buyers.

If you are interested in selling call us today at (941) 866 1666 for a free consultation.

 While in the past the majority of international buyers were retirees, the current buyers from overseas are getting younger and younger. Many of them are trying to secure a piece in paradise with a clear investment strategy. Use the home for a couple of weeks each year for themselves and rent it out to vacationers in order to cover the expenses like insurance and taxes. Just a combination of 2^nd home and investment.

However they have to keep an eye on one thing: Long term rentals don’t work, as they want to use the home or condo several times per year for themselves. They could rent it to snowbirds, but many homes are just too high priced in order to rent for 3 months or more. And many retirees are locked with their pension portfolios right now and have to scale back on their winter plans.

So these foreigners are advertising their homes as extended vacation places for other people who prefer the amenities of living in a community against staying at hotels for stay between a few weeks to several months.  Many communities in the Bradenton/Sarasota area however show relatively tight rental restrictions regulating the number of times per year a property can be rented out and/or minimum leases terms. Some restrictions are manageable, but if you are limited to a minimum of 6 months or just once per year, or even no rentals at all, it’s a “No-Go” for every investor.

Recent calculations show a loss in usability of about 25% – 33% for an identical property with or without rental restrictions. That’s about $100,000 on a $300,000 property in usability loss. The stricter the restriction the higher the loss. Because not everybody is planning to rent at this point the loss in property value might be a little less dramatic. As – however – in future more and more people are living on tight budgets, condos and homes with higher restrictions will have a lower potential of possible gain in value.

 For the homeowner it’s a disaster, just imagine: If somebody from your neighborhood knocks on your door and asks for support of new rental restrictions, ask yourself why they want to take $100,000 from your money? And if your association already has strict rental restrictions in place, ask yourself what you would do with the $100,000 if they get rid of them.

And the community is suffering, too: You have foreclosures or unpaid dues in your community? Maybe the owners are just not able to rent / sell their place as fast as possible. By time, they get late in the HOA dues and the community is suffering.

A well-off investor from overseas with cash in a property will probably be the best add-on for your community. So watch out and make sure you stay attractive for this clientele!

For more information on how to market your property locally and internationally please contact:

Axel Weiss, Broker
Weiss International Realty
Bradenton, FL 34205
(941) 866 1666

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BRADENTON / SARASOTA – Axel Weiss, managing broker with Weiss International Realty gives 5 tips for a quick home sale

1. Don’t try to chease the competition from behind, get ahead of it!

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