Michael Trust Realty - Your San Fernando Valley real estate professionals

Have a discussion with a Broker and Realtor(r) about various issues related to real estate. Enjoy Michael's random thoughts about Real Estate and the changing market, or what Michael likes in the Los Angeles area... Michael works primarily in the San Fernando, Santa Clarita, and Simi Valleys and in the West Los Angeles and surrounding area of Los Angeles... Serving your real estate needs in Encino, Tarzana, Agoura, Agoura Hills, Calabasas, Calabasas Park, Reseda, Woodland Hills, Sherman Oaks, Chatsworth, Canoga Park, West Hills, Winnetka, Northridge, Van Nuys, Studio City, Toluca Lake, Burbank, Granada Hills, Mission Hills, Arleta, Pacoima, Sylmar, Panorama City and the rest of the San Fernando Valley; Valencia, Stevenson Ranch, Saugus, Newhall, Santa Clarita, Canyon Country and the rest of the Santa Clarita Valley; Simi Valley; Moorpark; Newbury Park; Conejo Valley; Westwood, Century City, Beverly Hills, Bel Air, Santa Monica, Culver City, Mar Vista, Rancho Park, Cheviot Hills, Beverlywood, Miracle Mile, West Hollywood, and West Los Angeles. We've got your Real Estate Needs Covered!!

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October 2006

What Advice Would You Give to This Seller?

Posted at 10:02 AM, Oct. 19, 2006

A question was posed to me and I thought it would make great blog discussion. Here is the question and my response is posted below. What do you think?

Q- The second loan on top of the original mortgage wiped out most of the equity long before the condominium was listed for sale three months ago. Recent price reductions reduce what little equity was remaining, yet the drop from $500,000 to $460,000 still has not attracted buyers. The monthly loan payments are difficult for the owner who is convinced she should walk away, giving the property back to the bank. What would you tell her? What are the tax, financial, and personal implications of defaulting on the loans?

A- Walking away is certainly an option but not one that I would necessarily recommend. From a tax perspective, should the lender agree to a short sale, any “forgiven” loan amounts could be reported as taxable income to the IRS on a 1099, resulting in a large tax liability (with some exceptions; consult your tax advisor for more details and guidance); a foreclosure is more damaging to a personal credit profile than a short sale (neither of which are particularly good), so exploring a short sale would be worthwhile, provided it could be made to work for all parties.

The damage to the seller’s personal credit report would follow her for a number of years, although some mortgage lenders would potentially look past it in a couple to a few years’ time depending on other credit factors.

Obviously, the best solution would be to sell the property as listed and try to extricate the owner from the situation. A short sale or a foreclosure should be the last resort for any seller. In some cases, selling to a “fast cash” type of organization may be an option, but any sale would likely be far below market value and the seller may walk away without any profit (but this would still be better than a foreclosure or a short sale in most cases).

Any discussion about a short sale or foreclosure should be handled by an agent or broker with knowledge of the ramifications from a real estate perspective, and clients should be strongly advised to seek competent tax and/or legal advice for ramifications involving either or both areas.

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Thought for the Day - Working With a Realtor® is Needed Even More

Posted at 9:00 AM, Oct. 19, 2006

In today’s normal, balanced market, working with a Realtor® is needed even more.

The days of “easy” money, “easy” sales, etc. are long gone. Sellers and buyers now need competent representation: Realtors® have the training and experience to protect and fully represent both buyers and sellers; Realtors® take continuing education; and, perhaps most importantly, Realtors® subscribe to a rigid Code of Ethics to ensure that the public is protected.

In the boom times, many people obtained real estate licenses, and really did not have to work that hard to make a good living. In today’s balanced market, much more time and effort is needed to sell a property, and buyers have many more choices. Determining market value, for either buyers or sellers, looking at closing costs, contingencies, types of loans, etc. require a degree of knowledge that an experienced Realtor® can provide. It is important to note that all licensees are not Realtors®. With many unscrupulous or even unlicensed “agents” working in our area, working with a Realtor® is the smart choice.

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