Archive for the ‘Foreclosure / Pre-Foreclosure’ Category

Short Sales in 2014

Tuesday, January 14th, 2014

Tacking on a tax on Short Sales and Foreclosures is like adding insult to injury, but it may happen in 2014 unless Congress acts soon to extend a law enacted in 2007.

If they don’t act and we know how often that has happened lately, you could be liable to pay tax on the amount of the loss that the lender suffers on the sale of the home; unless you know what to do in order to avoid it.

The recently expired tax law enacted in 2007, allowed you sell your home as a Short Sale or have the lender foreclosed and not be required to pay taxes on the lender’s loss when you sell the property.

The expired law allows the lender to send you a 1099 for whatever money is lost on the Short Sale or Foreclosure of your home. But it did not require you to pay taxes on that loss, which is considered income to the seller.  For example, if the lender loses $40,000 on the sale of your home, they could send you a 1099 and you may have to pay taxes of approximately $10,000 if you are in the 25% tax bracket.

As I said earlier, Congress is looking into an extension, but there are no assurances that they will get it done.

So what should you do now if you are facing foreclosure and need to sell your home? Contact a Real Estate agent or broker that is experienced in negotiating these types of transactions and get some help with a Short Sale.

Will they always succeed in getting the job done? Not every time, but you will stand a better chance of avoiding foreclosure and better yet, not paying tax on the aforementioned 1099.  It is worth a shot.

Are banks in Kansas City pricing foreclosures low to spark bidding wars?

Saturday, May 12th, 2012

I have noticed that banks have adopted a new strategy regarding the pricing of foreclosed homes for sale. The new strategy may be to list them low to generate lots of buyer interest, which results in multiple offers and a bidding war for the property.

In some of my recent dealings my clients have been up against as many as eight other bids on a home and in some cases the homes sold for 10 to 15% over the listing price.  How is that possible? Isn’t this a “buyer’s market”?

The strategy is brilliant, and it is working!

Here’s a typical scenario of how this new strategy works; a home’s true market value is $250,000 but at this price the bank is likely to get offers that range from $200,000 to $220,000. The bank will be lucky to get the home sold for $220,000 or $30,000 below market value.

With their new strategy of pricing the foreclosed home below market value, they list the selling price of the home at $210,000 and buyers come out of the woodworks thinking that they may be able to bid $200,000 for the home and get the deal done. But with several offers on the table ranging from $190,000 to $210,000, the listing agent for the bank informs all the bidding buyers that there are multiple offers for the property, to please make what they believe to be their best offer and then the bank will decide which one suits them best.

If you are one of the bidding buyers and really want to buy the home, you are going to make an offer that comes close to meeting the real market value of the home or $250,000. The home ends up selling for $240,000 or nearly 15% over the listing price and more than what it would have sold if the bank listed it at market value.

Hard to believe? Not really, that is what the new Kansas City Real Estate marketplace looks like, and homebuyers need to know what a home is really worth when they make an offer, or risk losing the opportunity to buy it to others that will. This may mean offering the asking price and never looking back.

So does this mean buyer’s are paying more than they should? No, while most buyers struggle with the thought of paying substantially over what a home is listed for you have to keep in mind the value of the home. In the example above the buyer still got the home for under fair market value.

The Real Estate marketplace in Kansas City, Overland Park and the entire Metro area has changed and knowing the new rules of the game has become increasingly important.