Is It Potential To Accomplish A Short Sale In A Tenant Occupied Property?
Posted on February 5th, 2012
Hello, this is Kerri from the Bay Area Short Sale Angels, northern California’s primary short sale team. So lots of people ask us how we take care of tenant occupied properties. Many of our clients have investment properties that they need to short sale and even their primary residence that they moved tenants in with the intention to try to continue to make those payments and it is not working out. Each state has totally different laws, but within the state of California, the tenant is required by regulation to comply and not get in the way of the sale of a house. It does not matter that it’s a short sale or that the house is underwater, they need to participate. All that is required is 24 hour notice with the intention to show the property.
What we do as a team is try and get the tenant to work with us and have the least amount of disruption to their life. We promise them only two Sunday open houses from 2-4:30. We don’t put a lock box on the home so there will not be agents simply barging in all the time. In exchange, we often recommend that our landlords offer a break on rent throughout the promoting process. That is not something that is a legal obligation, its’ just a courtesy.
In addition to that, a number of tenants get frightened about their deposit and if the property sells, what occurs to their deposit? The deposit is transferred to the new proprietor and whether or not the owner goes to be one other landlord of the tenant or if they’ll wish to move in. That deposit sticks with the property and can return to the tenant minus any damages that have to be taken care of.
So, tenant occupied properties are somewhat bit harder to take care of but positively not impossible and we try and make it as friendly as we will to keep everyone happy. This is Kerri from the Bay Area Short Sale Angels where we believe there’s nothing worse than doing nothing. We’re northern California’s number one short sale crew and we look ahead to talking with you soon.
For more information on short sales and how to avoid foreclosure, visit the Bay Area Short Sale Angels blog or you can also contact the Kerri Naslund team and get started today.
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Understanding Short Sale Taxes
Posted on February 5th, 2012
When many individuals are losing their homes due to their lack of ability to pay their mortgage liabilities, owners are continually looking for ways to decrease their losses thru various means. One of these is doing short sales.
What’s short sale?
A short sale takes place when the mortgages against a property are greater than the property’s selling price. Many house owners resort to short selling to avoid foreclosure on their homes and at the same time still be able to pay off the loan to the lender through settlements.
The amount of debt that is canceled by the bank may become part of the borrower’s taxable earnings.
Nevertheless, not all canceled financial obligations will end up in taxable revenue. The exceptions include bankruptcy, insolvency (when total debt exceeds the fair market valuation of the taxpayer’s total assets), and certain farm debts (those at once sustained to operate a farm where over fifty percent the earning from the previous three years was from farming and the indebtedness was to an individual or an agency engaged in lending). Additionally, non-recourse loans and qualified principal residence indebtedness under the Mortgage Debt Relief Act of 2007 are also part of the exceptions.
Mortgage Debt Relief Act of 2007
In general, if you owe someone debt on your property and the bank forgives or cancels your debt, you may be taxed on the amount of loan pardoned.
Nevertheless through The Mortgage Debt Relief Act of 2007, taxpayers are able to exclude revenue gained from the discharge of debt on primary residence. The Act applies to all debts forgiven in the calendar years 2007 till 2012. The qualified amount for exclusion is up to $2 million of the forgiven debt and up to $1 million if the taxpayers are married but filing separately.
The exclusions are subject to some conditions. Before anything more, the cancelled debt should have been used to buy, build, or improve the principal residence. The exclusions do not apply if the discharge of the debt is due to the taxpayer’s performance of services for the bank or any other cause not directly related to the drop in the value of the principal residence or a fall in the financial condition of the taxpayer.
In the past, the IRS used to treat the pardon of debt as a taxable earnings. But taking out a mortgage is a financial obligation because you have to pay it back. When the loan indebtedness is removed or when it is reduced, such as when the bank forgives the loan, then the total amount of the returns become reportable as revenue since the duty to repay no longer exists. For the cancellation of debt, the lender should report the total amount of the cancelled debt to the borrower and the IRS on a Form 1099-C, Cancellation of Debt. Qualified householders must complete IRS form 982, which must be passed together with the Fed taxation assessment for the mortgage relief to be claimed.
Every short sale deal is never be the same. If you’re planning to explore this avenue, you have to have a clear knowledge of everything involved in short sales, especially the short sale tax consequences, if any.
Kendra Chui a short sale expert in California helps householders to get short sale approved with cash back.
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