Short Sale Benefits

Here are a few benefits for doing a short sale that may not have occurred to you:

• You are in control of the sale, not the bank.
• You may sleep better at night knowing who is buying your home.
• You will spare yourself the social stigma of the "F" word, foreclosure.
• Contrary to popular belief, you can be current on your payments and still effect a short sale.
• Your home sale will be handled like any other home sale.

Buying Again After a Short Sale

 If your payments have never fallen behind 30 days late and the lender does not require that you pay back the loan, Fannie Mae guidelines may allow you to buy another home immediately. The wait for an FHA loan is 3 years.

If your payments are in arrears yet a short sale is granted by your lender, you may qualify to buy another home with a Fannie-Mae backed mortgage within two years, regardless of whether the home is your primary residence.

Buying Again After a Foreclosure

With certain restrictions, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years.

If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years.

Affects on Credit After a Short Sale

A short sale is not a derogatory mark on your credit because credit bureaus do not show the word "short sale" on your credit report. It may say "pay as agreed" or "paid as less than agreed," among other categories. Some clients have reported negative FICO scoredrops from 50 points to 130 points.

The point drop is typically due to being in default, that is behind on your payments.

Affects on Credit After a Foreclosure

A number of sources have reported FICO score drops from 200 to 400 points after a foreclosure. Generally this credit score will remain on your credit report as a public record for 10 years.

Credit Reports After a Short Sale

All lenders report short sales differently and some do not report them to the credit bureaus at all.

Credit Reports After a Foreclosure

If a prospective employer runs a credit check on you, your job application may be denied if you have a foreclosure on your record.

Deficiency Judgments After a Short Sale

Judgments are often negotiated between the seller and the short sale bank. In some cases, such as California, if the home is your personal residence and was financed through purchase money, there is no deficiency judgment.

Deficiency Judgments After a Foreclosure

Banks are unwilling to negotiate deficiency judgments with the homeowner after a foreclosure. In California, for example, according to the California Association of REALTORS, a deficiency judgment may be filed if the lender forecloses under a judicial foreclosure versus a trustee sale or if the second loan is a hard money loan and the sale takes place as a trustee's sale.

Loan Application Questions After a Short Sale

Loan applications do not ask questions about a short sale. You may report that you sold your home.

Loan Application Questions After a Foreclosure

You are required to answer the question: "Have you ever had a property foreclosed upon or given a deed-in-lieu thereof in the past 7 years." If the bank sees you have had a foreclosure, your loan most likely will be denied. If you lie, you may be subject to investigation by the FBI for mortgage fraud.

Length of Time to Move After a Short Sale

If you've had a foreclosure notice filed, you may be able to postpone that action while the bank considers your short sale. The wait for short sale approval can be from 2 to 3 months, or longer.

Length of Time to Move After a Foreclosure

Unless prior arrangements have been made, the bank may want you to immediately vacate the property and can commence eviction proceedings.

Taxation After a Short Sale

A personal residence is exempt from mortgage debt relief until the end of 2012 on a federal level. Some states will still tax you unless you qualify for an exemption. An investor is not exempt from mortgage debt relief, subject to certain conditions.

Taxation After a Foreclosure

Same as with a short sale. Except some lenders immediately send out 1099s, even if the owner is exempt.

In closing, always obtain legal and tax advice before making a decision between a short sale or a foreclosure.

http://homebuying.about.com/od/foreclosures/f/072509_Short-Sale-vs-Foreclosure.htm?r=9F

Specifically, NAHB is asking Congress to extend the home buyer tax credit program through November 30, 2010 and make it available to all buyers of principal residences.

“If Congress acts to extend the tax credit program, it would spur 383,000 additional home sales, including 80,000 housing starts, creating nearly 350,000 jobs over the coming year,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “That’s good for the economy and good for America.”

Although there have been some signs of economic stabilization in recent weeks, the unemployment rate is rapidly approaching double-digits. Without a concerted focus on the housing sector, which comprises more than 15 percent of the GDP, any hope for a recovery could fade.

“At best, it looks like a jobless recovery once it gets underway,” said Robson. “This is why Congress needs to take bold, meaningful action now.”

In addition to extending the tax credit, Robson said home builders will be meeting with their lawmakers in their home districts during the August congressional recess and urging them to:

- Correct a faulty appraisal process. The inappropriate use of distressed and foreclosed sales as comps in determining home values is hurting home values and killing home sales. The situation is so bad that a recent NAHB survey of more than 500 builders found that one out of every four new-home sales are lost because appraisals are coming in below the contract sales price. NAHB is urging Congress to work with housing and federal regulators to adopt and enforce clear, concise regulatory guidance that will allow appraisers to develop realistic valuations based on sales that are truly comparable. Lawmakers should also call on the Federal Housing Administration, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac to establish an appeals process similar to the one used by the Veterans Affairs Loan Guaranty Program. Under the VA program, the appraiser is required to seek more information when it appears the appraised value will fall short of the sales price.

- Improve housing credit conditions. Since there can be no meaningful economic recovery until the flow of credit is restored to housing, NAHB is calling on Congress to urge regulators and the banking industry to end the stranglehold on acquisition, development and construction (AD&C) loans that has emerged as a major impediment to the housing recovery. Lenders are refusing loans for viable new housing projects and cutting off funding or calling performing outstanding loans, producing unnecessary foreclosures and losses on AD&C loans. Congress needs to urge regulators to allow and encourage lenders to give leeway to residential AD&C borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications and perhaps forbearance to give builders time to complete and sell their lots and homes.

- Co-sponsor Net Operating Loss (NOL) relief legislation in the House and Senate. NOL bills H.R. 2452 in the House and S. 823 in the Senate would prevent further layoffs in building and other industries hit hard by the recession. The legislation would help all businesses by eliminating the current $15 million cap on average annual gross receipts and allowing 2009 losses to be eligible for the expanded carryback. In addition, the bills would also help taxpayers who have been hit by the Alternative Minimum Tax to fully benefit from any NOL carryback. The bills both enjoy bipartisan support. Currently, H.R. 2452 and S. 823 have 92 and 37 co-sponsors, respectively.

Taken together, these four issues - extending the $8,000 home buyer tax credit for one year and making it eligible for all home buyers; bringing common sense to the appraisal process; urging banking regulators to ease AD&C credit; and passing the NOL carryback legislation - will not only create needed jobs for American workers quickly, but also stimulate demand for goods and services throughout Main Street America.

Real estate agents say that when Congress decided in February to create an $8,000 tax credit for first-time homebuyers — and set a Nov. 30 deadline — it turned August into the new real-estate rush hour. Because a sales contract can take months to complete, buyers are turning out in droves this month to ensure they make the deadline.

"It's having a big impact," said Iverson Moore, a spokesman for the National Association of Realtors.

The trade group is collecting data to measure just how big the impact is.

"We are hearing ... that a large share of first-time buyers are being motivated by the tax credit," Moore said.

To qualify, buyers must be purchasing a principle residence for the first time or at least for the first time after at least three years of renting. To keep the focus on first-time buyers, Congress set an income limit for the full credit. For a single person, it's $75,000 and for married couples, it's double that.

Just like the "Cash for Clunkers" program that helped the auto industry, the homebuyer tax credit is helping turn around the housing market. Moore's group said this past week that the number of contracts to buy previously owned homes rose in June for a fifth straight month.

Buyers will get the money when they claim the tax credit while filing their federal income taxes for 2009. So, for example, a person who normally would owe $8,000 in federal income taxes would owe no taxes at all after taking the credit. Even those who owe little or no federal tax can get the credit. The government will send them a check for a portion or all of the credit.

The credit is equal to 10 percent of the home's price, up to $8,000. So, for example, if a buyer is paying $50,000 for a house, the credit would be worth $5,000. The tax credit never has to be repaid. Last year, Congress created a different tax credit, but that one was effectively an interest-free loan. This money involves no repayment or interest.

Some members of Congress want to extend the credit. Last month, the National Association of Realtors testified before the House, saying the program has been so successful, it needs to be extended through next year. A bill has been introduced to stretch the tax credit through 2010 and has attracted almost two dozen sponsors.

Meredith Salsbery, a spokeswoman for Rep. Tim Walz, a Democrat from Minnesota, said that in recent days, the lawmaker has met with Realtors, home builders and constituents in his district who are calling for an extension of the program. "We're working on it," she said. Walz is a co-sponsor of the First-Time Homebuyer Credit Extension Act of 2009, HR 1933.

Realtors' spokeswoman Mary Trupo said chances for passage are unclear because of congressional concerns about the growing federal budget deficit.

"Some members of Congress are receptive, but there's a lot of work to be done to extend the credit," she said. "We don't know what the end result will be."

http://www.npr.org/templates/story/story.php?storyId=111637723&ft=1&f=1001