What Does Deficiency Waived Mean?

So you've heard about Short Sales or maybe you are facing foreclosure? 

What does deficiency mean?

You bought a home for $200,000.
Your unpaid principal balance is now $175,000.

You i.e. lost your job, got a divorce, overwhelming medical bills, etc.
and have missed several payments.
Your missed payments, interest, penalties and attorney fees brings your total due to $190,000.

You need to sell.

Your property value has dropped to $150,000.

The bank verifies the value has dropped, then allows you to short sale.

You avoid foreclosure.

The deficiency is the difference between your total payoff  ($190,000)
and current market value ($150,000)
making it $40,000!

The bank can do two things with the deficiency balance:
1- File a deficiency judgment against you for the remaining balance.
2- Agree to waive the remaining balance in the terms of the short sale.

What you want the bank to say in the short sale approval letter is:

Call me to find out what the ramifications of deficiency mean to you, as the laws vary from state to state.

Julie Larson
Realtor Utah
801-755-8899
Search for Homes Here

callteamlarson@gmail.com

Should I Short Sale my Home or Let it Foreclose?

Many homeowners will make every attempt to keep their home, once faced with financial difficulties. Borrowing from friends or family members; draining their savings; draining their retirement or children's college fund; long, tedious loan modification process, etc.

It's when the resources are all gone and they realize a loan modification is not going to happen, that homeowners face the decision to short sale or just let it foreclose.

Before you decide, there are several factors to keep in mind.

• Social Stigma - In a short sale, you are in control of the sale. You still get to decide which offer to accept and send to the bank. Your experienced agent is sensitive to the matter and will not put up a sign in your yard that reads "SHORT SALE" for all the neighbors to see. But the bank will have no problem at all posting "FORECLOSURE" if you walk away.
• Buying Again - Your dream is not over. Many homeowners who successfully short sale can buy in as little as 2-3 years down the road. For foreclosure, you're looking at 5-7 years!
• Credit - The late payments are going to be a big ding to your credit but did you know that some prospective employers will run a credit check and turn you away if he/she sees a foreclosure? The credit reporting on a short sale varies, but generally states, "Paid in full for less than balance owed" or it may say it's charged off.
• Incentive Programs - Since many banks are no longer participating in the government's Home Affordable Foreclosure Alternatives (HAFA) Program, some have come up with their own versions, offering homeowners relocation assistance. Before walking away, see what your bank has to offer.
• Deficiency - Whether you short sale or walk away and let it foreclose, the bank will issue you a 1099C for the deficiency. In a short sale, the deficiency will equal the remaining balance due under the mortgage note, after subtracting the amount of cash proceeds the bank receives from the closing of the sale. The Mortgage Forgiveness Debt Relief Act was recently extended to December 2013 and your CPA or tax professional will be able to determine if you are eligible.

I have helped over 125 Utah families avoid foreclosure and find the solution that best fit their individual needs. If you know of anyone in this situation, have them give me a call and I will discuss their options at no cost and with no obligation.

Julie Larson
Realtor Utah
801-755-8899

Search for Homes Here

callteamlarson@gmail.com

Fiscal Cliff Deal Includes Mortgage Debt Relief Act

MORTGAGE FORGIVENESS DEBT RELIEF ACT EXTENDED

 

In 2007, George W. Bush signed into effect the Mortgage Forgiveness Debt Relief Act. President Obama extended it and it was set to expire December 31st, 2012.

Congress passed a bill to avert the fiscal cliff and it will become law when President Obama signs it. Included in the fiscal cliff deal is an extension of the Act for one more year.

This Act waived the tax liability that previously came with the forgiveness of debt that happens when a bank forecloses or a homeowner short sales their home and the amount owed is greater than what the home sells for.

The difference between these two numbers is considered forgiven debt and reported as income to the homeowner by the bank to the IRS.

Before the Mortgage Forgiveness Debt Relief Act, losing your home wasn't the biggest pain you'd feel. You might also have to pay taxes on the forgiven debt as though it were income!

If I were facing foreclosure or if I owed more than my home is worth, I’d want to explore my options ASAP for two very important reasons.

1.  I want to resolve the forgiven debt situation before the end of 2013 so I KNOW what my tax bill will be (before the end of the year it’s GUARANTEED to be zero**).

2.  I understand supply and demand. The closer we get to the end of the year, the more the media will talk about the looming tax bill for homeowners and people will be frantically looking for help to avoid these taxes.  The last thing anyone wants is to owe the IRS taxes. The well informed will have explored their options and put in motion solid plans.

I’ve helped over a hundred homeowners over the past 5 years strategically avoid foreclosure. I’ve also helped a few who have waited until the last minute, but honestly, the longer a homeowner waits to get help, the fewer options they have & the more difficult recovery can be.

If you or someone you care about owes more than their home is worth, even if they are in the process of working out a loan mod, or plan to stick it out, just to be safe, they should give me a call at (801)755-8899 and evaluate their options.

Sincerely,

Julie Larson
Realtor Utah
801-755-8899
Search for Homes Here
callteamlarson@gmail.com

**If you are covered by the MFDRA.