If you are facing foreclosure due to the inability to make mortgage payments, it is important to consider ways of avoiding foreclosure—even if you cannot remain in your home. While a number of foreclosure avoidance options may not allow a struggling homeowner to keep the house, they can prevent a damaging foreclosure sale and everything it means for the debtor’s credit. Short sales are one option to avoid foreclosure in Oak Park and throughout Illinois. If you have never considered foreclosure prevention options in the past, the prospect of a short sale can be confusing. However, our experienced Oak Park foreclosure defense lawyers are here to assist you. The following are five things to know about short sales.
Short Sales are One Option to Avoid Foreclosure
As we mentioned above, short sales are one option to avoid foreclosure. Other options may include, for example, a deed-in-lieu of foreclosure or even a Chapter 13 bankruptcy filing if you are eligible. Unlike a short sale and a deed-in-lieu, a Chapter 13 bankruptcy can allow you to remain in your home and to get back on track with mortgage payments. When Chapter 13 is not an option, a short sale or deed-in-lieu can allow you to avoid dealing with the more severe consequences of a foreclosure.
Short Sales Can Still Damage Your Credit, But to a Lesser Extent Than Foreclosure
You should know that a short sale will still result in some damage to your credit. However, its effects will be much less significant than a foreclosure.
You Will Need Lender Approval to Do a Short Sale
You cannot simply decide to do a short sale on your own and move forward with the process. Instead, you will need to seek approval from the lender, and it will be critical to ensure that the lender agrees to forgive any remaining debt after the sale goes through.
Short Sales Can Take Some Time
Since short sales are complex, you should not expect that they will necessarily be quick. While short sales can happen relatively quickly, they can take many months.
Short Sales Tend to Fall Through More Often Than Traditional House Sales
If you are trying to sell your home through a short sale, it is essential to keep in mind that these are complex transactions and that there are often more routes for the lender or the buyer to back out, according to Bankrate. As such, while short sales are frequently strong foreclosure avoidance options for struggling homeowners, it is important to know that short sales do fall through with some frequency.
Contact Our Oak Park Foreclosure Defense Lawyers
Do you have questions about avoiding foreclosure or about short sales more specifically? One of our experienced Oak Park foreclosure defense attorneys can speak with you today about your options. We routinely assist homeowners with a variety of foreclosure defense strategies, including short sales, deed-in-lieu of foreclosure, and Chapter 13 bankruptcy. Contact the Emerson Law Firm today for more information about how we can assist you.
See Related Blog Posts:
What is a Consent Foreclosure?
My Home is Going Into Foreclosure: Should I Consider a Short Sale or Deed in Lieu of Foreclosure?
Showing posts with label oak park short sale lawyer. Show all posts
Showing posts with label oak park short sale lawyer. Show all posts
Tuesday, August 10, 2021
Wednesday, September 19, 2012
The Tax Man is Circling the Block
A recent article in the Chicago Tribune highlights what could be damaging news for many homeowners who are currently underwater on their home. A viable option to escape this predicament for someone owing more than their home is worth is the short sale. Although working with an attorney to short sell your home affects your credit, it is much better than the foreclosure alternative.
In 2007, Congress enacted the Mortgage Forgiveness Debt Relief Act that gives homeowners who short sell their homes a tax break. However, the act is set to expire December 31, 2012 so the gist of the bad news for these homeowners considering a short sale; Be careful, the tax man cometh.
The term “short sale” conjures up different feelings amongst different people. Many real estate professionals have never even heard of a “short sale” while others speak “short sale” as a second language. If you are not familiar with a short sale, here is a quick overview. Let’s say you finance the purchase of a home for $300,000. As a result of the real estate bust, your home is now worth $175,000, but you still owe $300,000. You sell your home through the short sale process for $175,000 and the bank forgives the deficiency. For now, that forgiven debt is not taxed. There is obviously much more to the short sale process that our Oak Park real estate attorneys can explain, but the general idea is to allow homeowners to get out from underwater on their homes and help them get back on their feet.
Mortgage Forgiveness Debt Relief Act of 2007 and How it Helps
Debt that is forgiven through the short sale process must be reported as income to the Internal Revenue Service. If your debt is forgiven due to a drop in your home’s value or a decline in your financial situation, the Act exempts taxes due on forgiven debt up to $2 million. The Act originally was set to expire in 2012, but was extended because the housing market was still in “free fall” at that time.
The measure is important because the intent behind it was to help homeowners get back on their feet. If you short sell your home and are forgiven tens of thousands of dollars in debt, but are then hit with a tax bill for several thousand dollars, then you are not much better off than before. In some cases, the forgiven debt or “shadow income” would actually push an individual into a higher tax bracket and thus compound the problem to an even greater extent.
Act Now!
A bipartisan group of lawmakers continues to push to extend this provision, but feel that a vote is “unlikely” until after the November election. Representative Jim McDermott, D-Wash went as far as saying that “The expiration of that provision is a hidden time bomb.”
Real estate professionals across the country report signs of improvement in the housing market, and they fear that failing to extend these cuts could damage the recovery. With the elections in November, there is a small window between the election and December 31st to try and extend this provision so there is no guarantee it will get extended in time to save the tax cut.
With this in mind, it is important for homeowners who are considering short selling their home to speak with foreclosure or short sale attorney who can explain the process as well as the ramifications of the sale. There are both legal and financial ramifications that must be explained and assessed by a professional. It is important to address your situation with your home sooner rather than later because later may be too late.
In 2007, Congress enacted the Mortgage Forgiveness Debt Relief Act that gives homeowners who short sell their homes a tax break. However, the act is set to expire December 31, 2012 so the gist of the bad news for these homeowners considering a short sale; Be careful, the tax man cometh.
The term “short sale” conjures up different feelings amongst different people. Many real estate professionals have never even heard of a “short sale” while others speak “short sale” as a second language. If you are not familiar with a short sale, here is a quick overview. Let’s say you finance the purchase of a home for $300,000. As a result of the real estate bust, your home is now worth $175,000, but you still owe $300,000. You sell your home through the short sale process for $175,000 and the bank forgives the deficiency. For now, that forgiven debt is not taxed. There is obviously much more to the short sale process that our Oak Park real estate attorneys can explain, but the general idea is to allow homeowners to get out from underwater on their homes and help them get back on their feet.
Mortgage Forgiveness Debt Relief Act of 2007 and How it Helps
Debt that is forgiven through the short sale process must be reported as income to the Internal Revenue Service. If your debt is forgiven due to a drop in your home’s value or a decline in your financial situation, the Act exempts taxes due on forgiven debt up to $2 million. The Act originally was set to expire in 2012, but was extended because the housing market was still in “free fall” at that time.
The measure is important because the intent behind it was to help homeowners get back on their feet. If you short sell your home and are forgiven tens of thousands of dollars in debt, but are then hit with a tax bill for several thousand dollars, then you are not much better off than before. In some cases, the forgiven debt or “shadow income” would actually push an individual into a higher tax bracket and thus compound the problem to an even greater extent.
Act Now!
A bipartisan group of lawmakers continues to push to extend this provision, but feel that a vote is “unlikely” until after the November election. Representative Jim McDermott, D-Wash went as far as saying that “The expiration of that provision is a hidden time bomb.”
Real estate professionals across the country report signs of improvement in the housing market, and they fear that failing to extend these cuts could damage the recovery. With the elections in November, there is a small window between the election and December 31st to try and extend this provision so there is no guarantee it will get extended in time to save the tax cut.
With this in mind, it is important for homeowners who are considering short selling their home to speak with foreclosure or short sale attorney who can explain the process as well as the ramifications of the sale. There are both legal and financial ramifications that must be explained and assessed by a professional. It is important to address your situation with your home sooner rather than later because later may be too late.
Monday, September 10, 2012
Short Sale Scam Letters
If you are one of the many homeowners having difficulty paying your mortgage, you may be considering a short sale of your home. A short sale is when your lender agrees that you can sell your property to a buyer for less than what you owe on it. As the number of homeowners and buyers considering short sales increases, so does the number of incidents of possible short sale fraud.
For example, last month three California men were arrested by federal authorities for allegedly running a scam involving short sales that caused more than $10 million in losses. It was reported that the case involved various crimes including identity theft, creating phony bank documents, and bribing bank insiders. The FBI searched the defendants’ homes and businesses in Los Angeles and Orange counties and the loot recovered is a testament to the lucrative nature of the scam All told authorities seized more than $1.7 million held in bank accounts, half a million dollars in cash, two Bentleys, a Mercedes, and various jewels, including diamond-encrusted watches.
As with similar real estate scams, the defendants preyed on distressed homeowners. The scammers claimed to have insiders working at the bank, who, in exchange for cash, would authorize short sales for far less than fair market value, according to court documents. The alleged scammers used short sale approval letters that had been entirely fabricated to convince the unwitting homeowners of the authenticity of the situations.
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Of course, this is just another reason why it is important not to cut corners when it comes to these real estate matters. Help exists for distressed homeowners, but it doesn’t come in the form of shady deals or hidden programs.
Scams with Short Sale Approval Letters Homeowners and title insurance companies are being warned about possible mortgage fraud that involves bogus short sale approval letters from Bank of America. For example, one of the largest title insurance underwriters in Florida sent an alert out recently that scammers are copying the giant lender’s approval letters, right up to similar language and the bank’s logos. In response, Bank of America is asking those who receive their letters in any jurisdiction, to call and verify the letter’s authenticity by calling their 800 number (866-880-1232, option 1).
Bank of America said that although the scams in Florida and California generally involve high end homes, with mortgages over $500,000, they will confirm any letter no matter what the amount of the mortgage. The scams appear to be fueled by a breakdown of communication between the title company and the bank. Florida tops the nation in mortgage fraud; more than $260 million in bank fraud was investigated in the Sunshine State in the first quarter of this year. However, any jurisdiction could be affected, and it is absolutely crucial for homeowners to be careful when dealing with these issues.
In our area, it is always prudent to consult a Oak Park real estate lawyer when working on short sales or other transactions to ensure things are done right every time.
For example, last month three California men were arrested by federal authorities for allegedly running a scam involving short sales that caused more than $10 million in losses. It was reported that the case involved various crimes including identity theft, creating phony bank documents, and bribing bank insiders. The FBI searched the defendants’ homes and businesses in Los Angeles and Orange counties and the loot recovered is a testament to the lucrative nature of the scam All told authorities seized more than $1.7 million held in bank accounts, half a million dollars in cash, two Bentleys, a Mercedes, and various jewels, including diamond-encrusted watches.
As with similar real estate scams, the defendants preyed on distressed homeowners. The scammers claimed to have insiders working at the bank, who, in exchange for cash, would authorize short sales for far less than fair market value, according to court documents. The alleged scammers used short sale approval letters that had been entirely fabricated to convince the unwitting homeowners of the authenticity of the situations.
.jpg)
Of course, this is just another reason why it is important not to cut corners when it comes to these real estate matters. Help exists for distressed homeowners, but it doesn’t come in the form of shady deals or hidden programs.
Scams with Short Sale Approval Letters Homeowners and title insurance companies are being warned about possible mortgage fraud that involves bogus short sale approval letters from Bank of America. For example, one of the largest title insurance underwriters in Florida sent an alert out recently that scammers are copying the giant lender’s approval letters, right up to similar language and the bank’s logos. In response, Bank of America is asking those who receive their letters in any jurisdiction, to call and verify the letter’s authenticity by calling their 800 number (866-880-1232, option 1).
Bank of America said that although the scams in Florida and California generally involve high end homes, with mortgages over $500,000, they will confirm any letter no matter what the amount of the mortgage. The scams appear to be fueled by a breakdown of communication between the title company and the bank. Florida tops the nation in mortgage fraud; more than $260 million in bank fraud was investigated in the Sunshine State in the first quarter of this year. However, any jurisdiction could be affected, and it is absolutely crucial for homeowners to be careful when dealing with these issues.
In our area, it is always prudent to consult a Oak Park real estate lawyer when working on short sales or other transactions to ensure things are done right every time.
Friday, August 24, 2012
Foreclosure, Short Sales, & New Federal Guidelines
When local community members come to our office seeking help with their housing situation, there are sometimes various options on the table. The River Forest and Oak Park foreclosure attorneys at our firm know that no two situations or goals are identical, and so a personalized approach is necessary when making an overall plan of action to deal with homeowner issues.
Of course one approach is to challenge the conduct of the banks that are seeking to foreclose on the home. The law has very specific rules about what these institutions have to do to properly foreclose--if they do not act appropriately, they may not be able to take the home.
However, at times there may be other ways that a homeowner can handle the situation. In some cases it may be prudent to try to sell the home and move on--this may be particularly attractive when the home is deeply underwater (more is owed on it than it is worth). A short sale may be worthwhile.
Short sales are notorious for the frustration they often breed--it may take months to get approval from all necessary parties in order to proceed. Fortunately, our Oak Park short sale lawyers know that many changes have been underway the past few months in an effort to better facilitate short sales. Many homeowners can take advantage of these opportunities to not only get out from an underwater home, but even receive relocation assistance.
For example, the Wall Street Journal reported last week on new rule changes to help make short sales more efficient and realistic for a growing body of homeowners. The new rules were announced by the Federal Housing Finance Agency and will apply to all homes backed by federal mortgage giants Fannie Mae and Freddie Mac.
One change involves opening up short sales to those who have yet to miss a mortgage payment. Some homeowners have been saddled by an underwater home, seemingly spending money for property that is worth far less than what it owed. Yet, banks were often loath to accept a short sale when the borrower was current on monthly payments. According to the new rules, which take effect at the beginning of November, even borrowers who are current may be able to take advantage of these opportunities.
In addition, the new rules place a cap on the amount of money that a second mortgage holders receive in the deal. All lenders must approve a short sale before it goes through. This presents a challenge when a home has multiple mortgages, because more than one lender must approve the sale. Second mortgage holders often balk at these sales, trying to stall the process in order to get a larger share of the sale price. The new rules seek to end the opportunity for those stall-tactics by placing a $6,000 cap on the amount they can receive. The goal is for this to speed up the sale, and make it more feasible.
Other parts of the new rules seek to streamline the process--requiring fewer documents to be submitted before approval. Also, those homeowners with various financial hardships--lost job, divorce, or death--may have an even speedier process to complete the sale and move on with their lives.
It will be interesting to see how effective these new rules are at helping homeowners get out from tough situations with a short sale. In our area it remains crucial for residents to remember that they do not have to go it alone. Take a moment to call our Oak Park foreclosure attorneys to share your story and see how we can help.
See Our Related Blog Posts:
Job Transfer with an Underwater House
Distressed FHA-Backed Loans To Be Sold in New Foreclosure Reduction Plan
Thursday, July 5, 2012
Chicago Tribune on the “Short Sale Maze”
At the very least, sellers (and buyers) should know what they are getting into when working through a short sale--the aid of a legal professional is often essential.
There is nothing all that complicated about the idea of a short sale. It is simply an agreement where a lender (bank) agrees to let a homeowner sell the house to a third party for less than the amount owed on the home. This allows the seller to get out of the mortgage without going through foreclosure, and, when done properly, to be relieved of a future deficiency judgment from the bank. The bank often prefers this, because it may be less costly and quicker than a foreclosure. While the lender does not like to give up on money it is owed, it sometimes makes sense for the lender to cut their losses earlier rather than later.
The Oak Park and River Forest real estate attorneys know, however, that the actual mechanics of a short sale quickly become complex.
According to a new report from the National Association of Exclusive Buyer Agents, in many areas only about 25% of short sale purchase contracts actually make it to closing. However, about 50% of homes offered as short sales actually end up being sold in that manner. In other words, about one in two short sellers will complete the process successfully, but many of them will need to go through multiple offers before everything comes together.
Reasons for the low success rates are varied. At a basic level, many deals fall through simply because of the time it takes for everything to come together. Buyers often cannot wait as long as necessary--months and months--and end up walking away. New guideline changes now in effect last month regarding homes backed by Fannie Mae and Freddie Mac are seeking to speed up the process. However, it remains to be seen if the new guidelines will actually translate into stepped up approval rates and speedier decisions by the banks.
No matter what, properly preparing the “hardship package” is critical for the seller. Not providing a thorough package may lead to significant delays and a scuttled deal. Having help with this is critical.
Though many challenges to short sales remain, it is important for local families not to write off the option. In many cases the sale fails because sellers do not have close professional assistance to ensure they navigate the process effectively. Short sales are still a popular option. In this first half of this year alone, about 110,000 homes were sold via short sale--about 12% of all home sales.
If you are in Oak Park, River Forest, or throughout Chicagoland, consider getting in touch with our office to learn more about your options and to see how we can help.
See Our Related Blog Posts:
Bank of America Announces Principal Reduction Plan for Underwater Homeowners
Oak Park Foreclosure Defense Lawyers Discuss the State of Illinois Foreclosure
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