Mortgage Forgiveness Debt Relief Act of 2007

Posted at 11:07 AM, Feb. 19, 2008

Just a little reminder as I'm thinking of doing taxes -wahhoo!  You may not know this important information and it will affect your taxes if you have experienced one of the three mentioned below!

When a borrower is unable to meet the monthly mortgage payments on their home, the borrower will lose title to their home through:
1. A Short Sale
2. Foreclosure, or
3. Deed in Lieu of Foreclosure

But, did you know that under Section 108(a) of the Internal Revenue Code of 1986, a mortgage lender who forgave debt was required to provide a 1099 Form to the IRS stating the amount the borrower had been forgiven? The amount of debt forgiveness on a home is then taxed as ordinary income, for any of the previously three mentioned methods.

For example, you owe $250,000 on a mortgage and the lender reduced the amount owed to $200,000 to facilitate a short sale. Under current tax law, the $50,000 in forgiven mortgage debt becomes taxable income.

Unfortunately, the majority of people in a situation where that can't make the mortgage payments are in financial distress (DUH!) and are unable to pay the additional taxes.

Relief is in Sight!
On December 20, 2007, President Bush signed H.R. 3648, known as the Mortgage Forgiveness Debt Relief Act of 2007. It amends Section 108(a) of the Internal Revenue Code of 1986 to ensure that any amount forgiven on mortgage debt secured by a principal residence will not be taxed. It was effective as of December 20, 2007 and applies to indebtedness discharged on a principal residence before January 1, 2010.

Common Credit Repair Scams & How to Avoid Them

Posted at 11:06 AM, Feb. 16, 2008

There are many legitimate organizations that help consumers fix their credit, but others are just waiting to take advantage of those needing help.

In today’s world of easy credit, bad credit and heavy debts are not uncommon. For many people, debt and credit problems become unmanageable. If you are looking for help, beware of several common credit-fix scams. First, understand that if there are errors on your credit report, such as debts that aren’t yours, you can fix these errors yourself for free. But, if your report is correct and simply contains information that you wish wasn’t yours, there isn’t much you can do. Creditors can keep debts on your credit report for seven years, and there is no magic trick that will make them go away.

Keeping that in mind, watch out for the following, as presented by Bankrate.com:

1. We speak the credit bureaus’ language or know some secret regulation that can make unappealing items on your credit report vanish.

Remember that there is no such thing as a secret formula that corrects unappealing citations on your report to make them go away. Some companies offering these services will just take your money and disappear. Others will bombard credit bureaus with frivolous disputes, and while these items are under investigation, they may temporarily be omitted from your report, after which they will return. The company, however, will show you your miraculously “clean” report and collect its fee. Also, keep in mind that the Credit Repair Organizations Act forbids any company from accepting money until after it does what it has promised, says Susan Grant, director of the National Fraud Information Center. Remember that scams will usually ask for money upfront.

2. We’ll convince the creditor that you don’t really owe the debt.

This works similarly to the first scam. Companies will concoct a scheme for you to challenge the debt or will claim that they will issue a deluge of procedural requests that will persuade the creditor to drop the claim.“Federal agencies have described these schemes as bogus,” says Deanne Loonin, staff attorney with the National Consumer Law Center. If you believe that you may actually have a defense with regard to a debt, you should consult a lawyer.

3. We will get you a brand-new, clean credit file. Remember that this is always illegal.

Companies may try to persuade you to apply for a new taxpayer identification number or employer identification number for the purposes of building a new credit history. This is a felony. Be especially vigilant of this one, because you may not realize what you are being asked to do because part of the con is not to explain the entire scheme. Besides being illegal, the “new” credit report would still list your name and address, which would still be connected to your old debts.

4. Call our 900 number for details on our credit-fix strategies.

This can be combined with any scam, and more than likely, the con artists will try to keep you on the phone as long as possible, extending huge per-minute charges.

5. We’ll clean your credit fast and use our contacts to get you a credit card, mortgage or loan.

This is a newer scam, and one of the most costly. Consumers who really need money or loans are especially susceptible to this, and can be persuaded to pay huge amounts to the scam. Some companies mimic credit-counseling agencies or mortgage companies, and will hit you up again and again, until you have nothing left. Since there are legitimate non-profit groups that help educate consumers with regard to their credit, it is best to keep a tight hold on your wallet and be wary of any quick-fixes or big promises. A little reference-checking on the Internet should quickly reveal the legitimacy of any companies.

Generally, be wary of companies that initiate contact, outrageous promises or huge fees. You should also be careful of two common mistakes that are not scams, but are costly. Refinancing your home to pay off credit cards is a bad idea since your home is now on the line. Also, since you are entitled to free copies of each of your credit reports annually, be careful of companies that ask you to pay for them.

Andorra Credit Repair Corporation is one reputable agency that you can contact with additional questions.

Your annual free credit report can be obtained at AnnualCreditReport.com. This site is sponsored by the three major credit reporting agencies, TransUnion, Experian and Equifax. You set up a log in and password, and it tracks the date and will remind you to pull your report again on the anniversary the following year.

Finding the Right Neighborhood to Fit Your Lifestyle

Posted at 1:18 PM, Feb. 14, 2008

It's the e-Harmony or Match.com Strategy for Home Seekers!

"Location, location, location!"  When we think of real estate, that phrase is usually the first thing that comes to mind.

Besides the obvious factors that most homeowners wonder about such as schools and crime statistics, how does a homeowner get a true feel for the neighborhood? When you buy a home, you are also buying a lifestyle.  A neighborhood can be similar to finding a mate. On paper, the list may look good.  The schools may have excellent ratings, the crime statistics may be low, and the curb appeal looks fantastic, but is that really the true tale signs of whether you and your neighborhood have made a love connection?  I sometimes hear people complain that they just don't feel as if their neighborhood is their "home."  They love their house but they wish they had more of a connection to the area.

So what can a homeowner do to get a good feel of the area?  Here are some good ideas that I give prospective homeowners:

    * Drive around the neighborhood at different hours of the day. Are people outside enjoying themselves - are they jogging, or taking their kids out with strollers. Are there people washing their cars in the driveways or working on their front yard?  People who are usually working on their homes and who are enjoying their surroundings, tend to invest more in their houses because they like the neighborhood.

    * Strike a conversation with some of the neighbors that you see. Introduce yourself and let them know that you are thinking of buying a home. Ask them them how long they have been in their current residence and if they like it. If you have children ask them if they know anything about the schools. This is a great way to get to meet your potential neighbors and get first hand information. I once had a client who preferred her privacy and didn't like a lot of neighborly interaction. She was considering buying a house at the end of a cul de sac. She decided to talk to her prospective neighbors and found out that in this cul-de-sac, it was customary for the homeowners to throw block parties and attend social gatherings on the block on a regular basis. This was way too much coziness for her so she decided that this may not be the perfect fit for her desired seclusion.

    * Visit local restaurants,malls, theaters, and other businesses. After all, these are the places that you will be frequenting. If you can picture yourself shopping and eating at these local venues, that is a good indication that you will like the area. If you see yourself driving across town because you are not impressed or thrilled about what your area has to offer, you may want to reconsider the neighborhood.

    * Check with the local chamber of commerce and see what projects are being developed. Do these stores and commercial developments fit your consumer needs?

The point is to spend time studying the location before you purchase the home.  Most people would not buy a car without test driving it first. The same holds true for your home and where you live! When you buy a house, you buy into a lifestyle. Make sure your neighborhood and your lifestyle are a good match.

How to Be Smart Investing in Real Estate

Posted at 10:07 AM, Feb. 13, 2008

Your Primary Home is First.
Buying your own home gives you a place to live and teaches you the cost of home ownership, financing and market conditions. You receive tax benefits and an asset that you can sell, many times for a profit. You will also learn about property maintenance and build your own network of professionals who can prove to be invaluable when investing. Finally, your first home could later turn into your first investment property! When you decide to upgrade or get a bigger house, you might be able to keep your first home as a rental property. Consult your real estate advisor to find out if your house would make a good rental property.

Knowledge is Key.
Being a savvy investor takes more than just buying up properties. Having a good knowledge base goes a lot further than a “sixth sense” for good deals. Use the Internet, read books by reliable authors, and attend investment groups and college courses. These are all good resources to learning the best investment practices. You should also tap into other successful real estate investors and real estate agents for information.

Professional Help Is Essential.
Although you may not think you need help, a trustworthy and honest professional may be the partner you need. When it comes to spending tens or hundreds of thousands of dollars, I'm sure you want to invest it wisely. You go to a dentist for your teeth, a CPA to prepare your taxes, a doctor when you feel sick....so why would you think a realtor is any less necessary as an important professional to include on your family team? Real estate is usually what people spend the most money on in their lives and yet they'll take short cuts and risk losing thousands of dollars trying to be an expert on their own. Realtors manage real estate transactions every day, whereas you may only handle one every few years.

Management companies take the pain out of property management. For instance, managing a rental property takes a lot of time, and you will need to be prepared to make repairs, resolve issues and advertise for renters if you are taking on the task yourself. In the long run, a management company may be just what you need. Use the referrals of friends, family and associates to find reliable, honest professionals to help you.

Know the Market.
Before you invest, research the local market thoroughly. There is no universal real estate “bubble.” Each market is different, and has different fluctuations and trends. One market may be good for rental income but not appreciation, while another market may be excellent for appreciation but not for rental income. There are endless variables, and it is important for you to know exactly what you’re getting into. Remember that one area is never the same as another area. Even within your local market, different neighborhoods may have their own fluctuations and pros and cons. Turn to your realtor for advice about your intention and what neighborhoods and areas will best reach your goal.

With these basic tips under your belt, you are ready to venture out into the investment arena. Happy investing!

How to Get Your Asking Price in a Buyer's Market

Posted at 12:14 PM, Feb. 9, 2008

In a buyers’ market it can often be tricky to get even close to your asking price. There are, however, a few things you can do to help get a little closer, or even actually get your asking price. A recent Realty Times article discussed some of the following tips that most people can implement to help get the asking price... and sell the house as soon as possible. There are generally three categories that they fall in:

ONE
Finish the unfinished rooms or convert any convertible rooms, such as the basement or a recreational room. Not only does this give an increased amount of usable space, but it can also be used as a selling point since these are expenses that the buyer doesn't have to incur. Not to mention, there seems to be an increased desire for move-in ready homes where the buyer does not have to do a thing to the house.

In houses over $500,000, offer a free media room. With deals, you can probably have one installed for around $5,000. Media rooms are something many house shoppers see as a neat luxury, and could be the difference between someone going for your house or someone else’s. Just over a year ago, Architectural Digest united with Sotheby’s International Realty Affiliates, Inc. in a consumer-trend study to find that 32% of people seeking a secondary home wanted a media room/home theater.  For more info on top amenities buyers look for in luxury homes, click here.

TWO
You can make the mortgage on your house more desirable by buying down the interest rate. This is something fairly easy to offer someone, and a lower payment certainly makes your home more desirable!

Rather than offering a cash-specific incentive, you can offer something else like a vacation. Again, this makes your offer stand out from other offers.

Offer seller financing. This is actually not that difficult to do if you can make the deal work, and can actually end up earning you some money. Talk to your realtor about the possibilities.


THREE
Offer to pay their HOA fees for a year. This is a practical buyer benefit. If someone is carefully looking at their budget, not having to include these fees in their monthly expenses can be a big deal.

Offer to pay off some of their debt. If this is done as part of the loan program, then it could lead to the buyer qualifying for a larger loan, or a better interest rate. If just a side agreement, then again, it could mean lower monthly payments, which can be extremely important to the buyer.

Finally, you can always offer to pay the closing costs. These tend to be something that is a big hit to buyers’ pocketbooks, and something people don’t adequately budget for when shopping for a new house.

Unfortunately, other than the few aesthetically appealing things you can do to spruce up the house, real incentives tend not to be cheap. They can mean the difference from having to drop your asking price by quite a few thousand... or actually getting what you want! The key to choosing which incentive to go for is to think about what incentive works best for you AND what is a true attraction for the demographic of buyers looking to buy your house and in the community you're in.

Inexpensive Home Improvements And Tips to Sell Your House Faster

Posted at 4:16 PM, Feb. 4, 2008

Make your home desirable for a buyer.  What made you fall in love with your home when you bought it?  What are the home's weaknesses?  Be clear on both of these and enhance the strengths and minimize the weaknesses.  If the house lacks storage space, don't enhance that fact by not cleaning out the closets so when the prospective buyer opens it they get pummeled by your stuff falling on them!   Organize the closets and cabinets so everything appears neat and spacious.  This doesn't cost anything other than time and possibly a good friend to keep some of your stuff in boxes.

If you can’t afford big-ticket items such as renovating your kitchen or adding bathrooms, consider small improvements that can make a big difference.  A recent survey found that a simple hanging storage system in the garage was more valued by buyers than a big kitchen, big backyard or a formal dining room!

Also make sure you do little maintenance things to enhance curb appeal, such as washing the windows, trimming bushes, repairing the driveway, repainting the front door and making sure the doorbell works.

Finally, a dirty house will always put buyers off. If you have to, hire a cleaning service to clean your home once a week while it’s on the market.  With so many homes to choose from right now, buyers don't have to see pass the dirt and how a house "could" look like a home.  They just want to see the next home on the list!  

Pets are the Latest Foreclosure Victims

Posted at 1:13 PM, Feb. 1, 2008

Could you treat your family member like this??

As more and more home foreclosures hit the market, the biggest and most unknown losers are family pets who are being deserted by their owners.

Animal welfare experts say that the United States slumping housing market has led to an increase in the number of abandoned animals. For some of these homeowners, feeding their pets is just not affordable anymore. Many homeowners are having to move in with relatives or find rentals where pets are not allowed.

Pets are being dumped all over the country. Dogs are being found in farms and domestic cats are showing up in feral wild colonies. Even worse, some pets are being left behind in their foreclosed homes without any food and water.

Many foreclosure homes and go weeks without having a showing. An animal left behind does not stand a chance. It can take weeks for an animal to starve to death. Desperate scratch and bite marks are usually found on doors, windows and baseboards.

Recently, the animal rescue group, Paw Placement, was part of a a huge rescue mission to save abandoned cats that were left behind by their previous owners in a demolished apartment building. Many of these cats were starving and sick due to neglect.

Although some pet owners may think they are doing their pets a favor by not taking them to a shelter or the local pound, they are mistaken. Pets get dependent on their owners for food and their well being. They are domestic animals that are not equipped to survive on their own. They have no chance of survival by being abandoned and their fate is ultimately a painful and suffering death.

Homeowners facing foreclosures should be encouraged to bring their pets to the local humane society or Animal Care and Control facility. In these facilities, their pet at least has a good opportunity of being adopted. Although not every pet will find a home and may be euthanized, they still have a chance. As Stephanie Shain from the humane society put it, " They'll be fed, have water and/or have a humane euthanization, as opposed to spending the last days of their lives eating carpet or wallboard."

*** Pet abandonment and pet dumping are illegal in most of the United States. In Arizona, this is a class 6 felony.