My New Blog

Many homeowners believed they could just walk away from their home. When the homeowner lost their home to foreclosure or completed a short sale, they thought their homeownership issues were over. Life was moving along. Exhale. And then… two unexpected and unwelcomed knocks on their door.

The First Knock

The first was the equity line. The equity lender comes knocking and wants the former-homeowner to pay up. The former homeowner assumes it was all wiped out in the foreclosure or short sale. Unfortunately for the homeowner, home equity lines have terms that allow them to survive the foreclosure and short sale…to effectively detach themselves from the home and follow you around like an unwanted credit card debt.

To address this knock, but only in part, the State of California enacted a law that became effective in July of this year. It only applies to short sales…so if you just let the home go to foreclosure, you can still expect that first knock. The law states that if you have an approved short sale, the second lender/equity line lender cannot come back after you (and they cannot ask you for a promissory note or repayment agreement as part of the short sale approval). This is ONLY in California. So if you have properties elsewhere, check local laws.

The Second Knock

Then comes the former homeowner’s second, unexpected knock. The tax man. The tax man wants money from the former homeowner, too. “He” sees the debt that you did not have to pay as income. In an oversimplified example, if the homeowner sold in a short sale or foreclosure for $200K and the homeowner owed $425K, the tax man treats the difference ($225K) as if you got a check for that amount. Even in a low, 15% tax bracket, that means the tax man is looking for you to fork over $33K. A scary knock indeed.

To address the second (tax man) knock, the Federal government enacted the The Mortgage Debt Relief Act of 2007 (the “Act”). It said (over simplified again), that if you sold your primary residence, then the tax man would not treat the amount ($225K in our example) as income. However , the Act is only effective through December 31, 2012. If you sell or foreclosure after that, watch out, the second knock may be making an unwelcome (and very expensive) comeback.

In short, if you are selling your primary residence as a short sale, do it in 2012. Otherwise, you may be facing the dreaded and expensive second knock. The tax man cometh.

The laws discussed above are, as stated, simplified (there are pages of exemptions, exceptions, conditions and details that apply). If you would like me to look at your situation specifically, I am happy to do so…at no cost, pressure or obligation. It’s a big decision, and you need the complete freedom to make it. When and if you are ready to move forward, we are happy to help.

You may reach me at (714) 863-5485 or soldbymelinda@gmail.com

-melinda

PS This article does not constitute legal advice. The laws referenced above are complicated, detailed and subject to conditions, exceptions, exemptions, limitations, etc. Certain provisions are overly simplified and presented here for purposes of general information. They are not meant to advise anyone as to their particular situation.

Have you thought about taking advantage of the rising real estate rents but wondered what might be involved in putting on the landlord hat? Here's the basics on becoming a landlord..

1.  Run the proforma numbers.  Before you purchase the potential rental property, make sure you have the most recent numbers and you are comfortable with the likely rents.  Know your competition (what's for lease in the area?) and the most recent similar rentals in the area.   Have you factored in some possibly vacancies? Property taxes? Repairs? The benefits of depreciation?  After dong so, does the property make sense for you from a numbers stand point? 

 2.  Make sure your docs are tip top.  You'll need, at a minimum, a lease application, a lease agreement and a credit authorization. Most leases are for at least one year.  There are standard California Association of Realtor forms that cover what you'll need or your can purchase a form set on line. Most realtors charge 6% of a year's lease to find prospective tenants, check their background/app and prepare the lease documentation. When we work with a new landlord and assist in the purchase, we typically put the first tenant in free of charge.  If you are working with a realtor, ask them if they will do the same. 

3. Do your homework on those prospective tenants. Make sure you (or your agent) check backgrounds, confirm employment and run credit checks so you can reduce the risk of any future problems.  Its helpful to request a copy of the tenant's driver's license and pay stubs.  ALWAYS run a credit report.  Be patient...it can pay to wait for the "right" tenant.

If you want some help or just want prefer to limit your landlord duties to collect the net rent each month, we can help. We offer property management services (we'll take the 2AM flood call and arrange for repairs if needed), pay the gardener, etc.  Call or email us for details!

If you are looking for a rental property, we can help you find it.  We'll put your first tenant in, free of charge.

Melinda (714) 863-5485

For years I had been warning that this could happen.  I warned that if a short sale approval letter is not reviewed by legal counsel, the seller could have exposure (liability, unexpected debt).  Unfortunately, that is exactly what came across my desk this morning. 

Here is the story.

A few years ago Lisa** closed a short sale with an agent (NOT one of our agents). The agent assured her she would no longer owe anything on the loan. But the short sale agreement issued by the bank said something else.  Its not easy to spot...but the agreement was a "lien release" not a "liability release".  This simple difference in wording and the type of loan meant she still owed the remaining loan balance after the short sale.

Lisa unfortunately relied on her agents advice and for the last few years has been fighting the bank claiming this was not due (which is why she copied me).  However, it now appears that the amount really IS due.  The agent did not catch the difference in wording, or failed to disclose it to her client, and left her client exposed.  Its not pretty. 

Recent changes in law (July 2011)  provide protection in California so that any short sale closed after that date will not result in the kind of exposure that Lisa is facing. But what about the hundreds of thousands of homeowners who, like Lisa, closed before July of this year?  The unfortunate answer is they may be exposed. 

If you or someone you know is wondering about exposure after a short sale, feel free to send me over the short sale approval letter and I will share my thoughts (at no cost, of course).  We can quickly review and determine liability.  

If you or someone you know is considering a short sale, consider Freedom First Properties.  We are experienced with a 100% closure rate on our short sales...and we like to keep it that way.  Our sellers have the benefit of a realtor, broker and attorney...and all short sales are done at no cost or expense to seller. 

If you have any questions, do not hesitate to call. (714) 863-5485

Melinda

Realtor + Broker + Attorney

PS **Not her real name.

No doubt the real estate market has been down with a very bad case of the flu since Fall of 2006.  While this flu has MANY symptoms (short sales, foreclosures, loan mods, etc), there are actually a few signs the market could be on the mend. 

One sign of recovery is the return of the buy and hold investor: the landlord.  Granted, investors have been in the market since the first moment the market was woozy, but most of them were the "buy low, sell high (and FAST)" investors--the flippers of the market.  There are still out there...but they are now joined by the buy and holds--a much needed stabilizing force in the market called the landlord. 

So why the return of this noble rent collector?  The market is welcoming back this old friend by offering bargain home prices, radically low interest rates, significant demand for, and limited supply of, rental properties, and then topping it off with increasing rents (back to basic economics, high demand + limited supply = increased rents)...which all makes for a lovely combination for the landlord and landlords to be...There has not been a better time to buy an investment property in the last decade.

So while the media may paint a picture of the real estate market on its deathbed, savvy investors see something else. Opportunity.  Are you one of them?

For information on investing, buying or selling, call Melinda @ 714 863-5485

During my years as a Realtor, I've seen sellers make some unecessary and sometimes costly mistakes. A very common mistake I see is failing to do the simple things that cost little to no money, yet always attract buyers and help homes sell for more. If your home is logically a good value, but buyers in the market don't feel warm and emotionally attracted to the home, you will receive fewer and lower offers.

That's because buying a home is an emotional decision on the part of the buyer. Often the buyer doesn't even consciously know why they like one home more than another... they just do. Buyers make decisions on a deep subconscious level tied into what makes them feel comfortable, safe and secure. That's why it's so important to make sure your home looks, feels and smells its best. Remember that you're competing with all the other homes for sale. Since people buy on emotion, let's look at how your home can be the cleanest, freshest and cheeriest. This will lead you to a much faster sale…at a higher price.

Here are the five most powerful factors that assure buyers experience a good feeling when they see your home:

First, The Cheer Factor: For maximum visual effect, turn every light on, even on a sunny day. Light creates a warm, safe feeling. Open all window shades. Clean your draperies and curtains. Make sure your windows are spotlessly clean. Let the sun in and keep those lights on. Leaving all your lights on for two hours costs very little, and makes your home look larger and more spacious.

Second is The Access Factor: Buyers and real estate agents are busy. They're not looking only at your home, but fitting your home into a schedule that allows them to look at other homes as well. The more flexible you are with your showing schedule, the more buyers will look at your home.

Third, is The Distraction Factor: Do everything you can to minimize distractions for the buyer. Turn the TV and the loud music off. Leave only soft, background music playing. If at all possible, make arrangements with a neighbor to take care of children or pets. If that's not possible, consider taking a walk around the block with kids and pets while buyers browse, or simply take them outside.

Fourth is The Décor Factor: Tasteful and up-to-date décor is your best investment for getting a greater return on your money. Paint and new wall coverings makes the whole house smell clean and neat. Faded walls and worn woodwork reduce the desire to buy. Clutter also distracts buyers and makes your home seem smaller. Clear counters, shelves, displays for an open and roomy look. Pack extra items in boxes and store in the garage or attic. Don't tell a buyer how your home can look; show them by making it look great. The result will be a quicker sale at a higher price.

Fifth is The Front Yard Factor: A pleasing exterior invites inspection of the interior, since your front yard reflects the inside condition of your house. Make certain that trees are trimmed so the house can be seen from the street. Have the grass mowed, trimmed and edged. Rake leaves. Plant fresh, seasonal flowers. Sweep walkways. Clean away any debris. Wash windows. Remove parked cars. This all adds to curb appeal. If a buyer doesn't get a warm, cozy feeling by driving by, fewer will ask to see the inside.

Those are the five factors to consider. However, there is one, final, most important factor to consider… and that is your competition. People don't look at just one house and then buy. They look at five, 10 or 15 homes before making their decision. How does your home stack up against the competition? This requires a detailed review of what’s out on the market right now. If you are planning to sell and want to see some of your competition, let me know and I’ll email them over to you.

Wishing you the best. Melinda (714) 863-5485, soldbymelinda@gmail.com