Amir Aliloupour\’s Blog

What is Short Sale?

Short sale means that the balance of the homeowner’s debt is more than the property value and the homeowner is not in position to repay the balance in which is secured by liens against the house. This balance is called deficiency and in a successful short sale could release homeowner’s obligation to repay the loan. After a short sale, homeowner may find it difficult to obtain a loan or credit.
Most lenders work with homeowner to proceed with short sales if the seller has a hardship such as financial or health, and if the house is worth less than the mortgage ballance.
We always advise our clients to obtain information from professionals such as, a real estate attorney, tax attorney and tax accountant before proceed with short sale.

A seller should be able to prove a hardship to the lender in order to have a successful short sale such as:

• Loss of job
• Reduced income
• Job relocation or job change
• Prove of divorce for couple who are going through seperration
• Health issues
• Bankruptcy
• Borrower or co-borrower’s death

A Short sale in most cases is the best alternative to foreclosure since it reduces additional costs to the lender. A short sale could result in a negative credit report for few years but is important to know even after a successful short sale, borrowers could find it difficult to apply for a new loan until their credit is re-stablished.

Most sellers choose short sale because of the tax forgiveness program which offers a relief to homeowners who would owe taxes due to foreclosure.
This protection is limited to primary residences only but it is essential to consult with a tax advisor to ensure that you qualify for this relief program.

Most short sales have a high risk of failure because of failure to obtain agreement from all parties or they might not be approved in time to prevent a foreclosure. These parties are as followed:

• First Mortgages,
• Second mortgage or lien holder
• Line of credit against the house or Mechanic liens
• Unpaid HOA dues
• Income taxes

Due to the overwhelming number of defaulting homeowners due to most recent financial collapse, some creditors may accept applications even if the borrower is not in default with their mortgage payments. Most banks use pre-determined criteria for approving the borrowers and the terms of the sale of the properties and they have special loss mitigation departments that evaluate borrowers’ short sale package for short sale approval. They determine the market value through a Broker appraisal that calls BPO or Broker Price Opinion.

A short sale can still take several months from start to finish due to multiple levels of approval.
In order to insure a successful short sale, a homeowner needs to prepare the following documents as part of the short sale package:

• Authorization letter to give the real estate agent or third party negotiator access to contact the bank.
• Seller’s net sheet or HUD_1 along with the offer
• Completed seller’s financial statement such as bank statement
• Seller’s hardship letter
• Income tax returns for the past two years
• Two years of W-2s
• Two most recent payroll stubs
• Last 2 months of bank statements
• A report by listing agent with most recent sold properties (COMPS)

The Home Affordable Foreclosure Alternatives (HAFA) program is also available if you can’t afford your mortgage payment and to transition to more affordable housing. You can get free advice from HUD-approved housing counselors and by licensed real estate professionals who know about this program. You can visit www.makinghomeaffordable.gov for more information

For more information you can contact me at aliloupour@yahoo.com.

There are various reasons when a home buyers start looking for their dream home but there are many things that a buyers might overlook in this hectic process. Keep in mind that responsibility for some of these important things is not on the seller or the agent, but the buyer.Here are few things that you should be proactive when researching for a home;

• Neighborhood culture: Are you a good fit? How is the safety? Spend time to talk to few neighbors about their experience living in the area. Nothing is more disturbing to find out something that could be a deal breaker after you closed the escrow. Spend some time just hanging out and remember that poorly maintained neighborhood could drag down the house value and much more.
• Pollution and odors: The smell from nearby farm or manufacturing plans may not be apparent in certain days. Make several stops at different times of the day or night and pay attention to nearby factories or refineries.
• Traffic and noise level: Is the house located near a major intersection? Can you hear the traffic when you open the windows? Can you hear the amplified voice of a nearby business or neighbor? Is the property near a public club or worship place?
• Governmental authority: Is the house within a city or town you think it is or it isn’t  un-incorporated? Different municipalities means different zoning, law enforcement and fire department, watter supply, trash and sewer services or maybe non of them. Check with city planning department if there is a vacant lot nearby.
• Is there a HOA and what are the rules: Make sure you get all related HOA and CC&R documents beside bylaws to find out exactly what the restrictions are. Sometimes having HOA keeps the neighborhood consistent with code compliance. How much is the fees and how much was it increase throughout years?
• History of the house: How many times the house was sold and why? Any crime has been committed at the property? What about insurance history? Any contamination or damage to the house?
• School ratings: How are the school ratings? How is the ration between students and teachers?
• Financial responsibilities: The following list depict an example of the costs you may be responsible for such as; title insurance premium, escrow fees, document preparation, notary fees, recording charges, inspections, tax proration, loan charges, assumption/ change of record fees for takeover of existing loan, home warranty, city transfer/ conveyance tax, fire insurance premium for first year.

Remember, you should ask a lot of question before you get into a contract and most importantly, before you remove all of your contingencies. It is better to be safe than sorry.For more information, please contact me at (925) 876-0255 or e-mail me at amir@yahoo.com.

Foreclosure may occur when you miss your mortgage payments. This is the legal means that the lender can use to repossess your home. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued. You should not try to ignore the letters from your lender and instead try to communicate with their loss mitigation department without delay. Try to explain your situation and be prepares to provide them with financial information such as your income and other expenses. You also could contact HUD-approved housing counseling agencies.

What are other alternatives?

Special Forbearance. Your lender may be able to arrange a repayment plan base on your financial situation and even provide for temporary reduction or suspension of your payment.

The promissory note. It is interest-free and is due when you pay off the first mortgage or when you sell the property.

Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property as a short sale to pay off your loan.

Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house but will be less damaging on your credit report.

Your lender will determine if you qualify for any other alternatives and try to beware of scams.

1031 tax-deferred exchange is an investment strategy that should be considered by anyone who owns investment real estate. IRS allows an investor to defer capital gain taxes upon the sale of a property if the investor reinvests exchange euity into other investment property. It does not apply to exchange of stock in trade, inventory, property held for sale, stock bonds, notes, securities, or interest in a partnership.  

It is simply a method by which a property owner trades one property for another without having to pay any federal income taxes on the transaction. It offers means to preserve the wealth that the investor has worked so hard to accumulate and to grow the assets by reinvesting the tax savings.

Type of exchange

Simultaneous Exchange: When two properties are exchange simultaneously or property for property swap, which one property is sold and replacement property is found and purchased at the same time.

Forward Delay Exchange: This type of exchange is the most common exchange and it happens when  the relinquish property  was sold and the replacement property was purchased within 180 days following the sale of relinquished property.  

Construction Exchange: This type of exchange occur when the tax payer uses the funds from the sale of the relinquished property to construct improvrmrntd on replacement property.

Reverse Exchange: In this exchange the replacement property must be purchased before the sale of the relinquished property.

The important Rules of Exchange

• The exchange has 45 days from the date the relinquished property closes to identify potential replacement properties and the purchase of replacement property must be completed within 180 days after the close of the relinquished property.
• To avoid capital gain taxes the exchanger has to purchase a replacement property that is the same or greater value as the relinquished property and reinvest all of the equity into the replacement property and obtain the same or greater debt. The exchanger must sell property that is held for income or investment purpose and acquire replacement property that will be held for income or investment purposes.

Contact your attorney or tax adviser for more information.

After meeting with your lender and have a clear idea on how much a house you can afford, then you can start  your search for your dream home. There are some common mistakes that you have to avoid during your search including not having the right idea of what you are looking for, dealing with a real estate agent who has more interest of getting paid that finding the right home for you, or getting into a bad loan that could put you in a very bad financial situation in the future, and most important not to pay attention to the inspection reports, disclosures and your purchase contract.

Most  of today’s foreclosures could be prevented by having informed buyers. The most important thing is not to reinvent the wheel since there is always a right way to buy house.  

When you start your search, you need to start gathering all the right information that could help you with your decision making process.

One of the best ways is to start is by contacting a good real estate agent with the knowledge of the market. You also have to have a set of criteria that reflect your needs and wants that has to be answered.

·               Do you want a newer, older or fixer upper home?

·               What type of home are you looking for? One story, Ranch style, townhouse?

·               What are the minimum bedrooms, bathrooms and square foot of the house that you need?

·               Is there any particular school district that your children need to be in?

·               How far are you willing to commute to work considering the time and money that you could spend? Any public transportation?

·               Do you want a big yard? Do you mind the street noise? Is view important to you?

·               Do you need a bigger kitchen?

·               Do you need to be close to parks, shopping, Freeways?

In order to  remember what you see  always carry a camera, a checklist or notepad to write on, and a map to mark the location for the future reference. Try to keep your  preview to three or four homes daily if possible. One of the most common mistakes that home buyers make is to look at to many homes that could cause exhaustion. You need to be able to remember every detail of the house and don™t get overwhelmed with non important factors.

And always remember to ask questions that are important to you. Your agent could be very helpful by using his resources and it is far better to find out about the problems of a house before you buy than to be stuck with them after you own it.

When you sell your home you owe taxes on your gain. It is the difference between  its adjusted cost basis  and what you sold it for.

How to calculate gain

1. Take the purchase price of the home or the amount that contributed at the closing.
2. Add adjustments: Cost of purchase, cost of sale and  cost of improvements.
3. The total of this is the adjustment cost basis of your home.
4. Subtract the adjusted cost basis from the amount of money that  the house was sold for.

Real estate exemption for capital gains

It is up to $250,000 ($500,000 for married couple) in capital gains on the sale of the home is exempt from taxation. You must lived in the home as your principal residence for two out of five years and not sold or exchange another home during the two years preceding the sale.

Contact your attorney or tax adviser for more information.

Year 2010 could be the best year in real estate market with so many great investment opportunities that are available for the informed home buyers. As everyone knows by now, one of the biggest reason we  find ourselves  in this market is  due to  buyers who rushed into buying and forgot  to ask  the very  fundamental and basic  question that any home buyer should always ask before start looking for homes: “what can I really afford?”

Ultimately, how buyers  ends up buying a home is going to be a direct result of  their  market knowledge and the more they  understand the fundamental rules, the better position  they will be in negotiating for the best possible outcome.

There are several basic elements that could help you to find out  how much you can afford and what you can spend for  your dream  house:

• Location- How far will be your commute to work each and every day, how are the schools, the location of the home in the neighborhood, how close to shops and transportation and other important safety and geographic questions that could affect the value?
• Down payment- How much are you comfortable to put down without breaking the bank or what options are available  to you and if there are programs that you could qualify or  use someone elses money instead your own?
• Mortgage qualification- You need to ask yourself what type of mortgage payment can  you afford after checking your last year income tax and calculating all  other expenses  which could give you  good ideas on  how big  your mortgage payment could be. A good loan officer can do some calculations and tells you how much money the bank can lend you toward your new home.
• Closing costs- One of the most important cost in a real estate transaction that  is mostly  overlooked and should be taken to consideration from the beginning is the closing costs. It could be from 3 to 5% of the value of the home and  your  real estate  agent  might be able to  help you  with negotiating some or all  of that depends on the  type  if sale, like short sale, REO…  

Finally, buying a house must be a team work  that includes  your family, your real estate agent,  loan agent and  other parties involved  during your search. You also need to be mentally alert and positive to make sure  not to  lose  your sight on  the original needs and your real budget and objectives. Lastly to  have fun and be excited during the  process since it will be part of your memories after moving in.    

P.S.If you have any questions about buying  a home, or how to avoid  making mistakes that  most buyers make, feel free to contact me at aliloupour@yahoo.com  and let me help you with your questions and concerns.

Welcome to Amir Aliloupour’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Danville.