What will happen to Orlando short sales if the Mortgage debt relief Act of 2007 is not extended?
Short sales have been very popular since the market crashed in 2007, mainly because sellers have the benefit of not being taxed for the deficiency between the mortgage amount and the actual payoff. What people worry about now is that the Mortgage Forgiveness Debt Relief Act of 2007 is about to come to an end at the end of 2012 and so far we haven’t anything about the government extending it.
What do you think would happen if the law doesn’t get extended? In my opinion, this would be the end of Orlando short sales as we know them.
When you think about it, what incentive would a seller have to do an Orlando short sale if they end up with a massive deficiency when it closes? That’s right… there would be no incentive. In fact, I think that most people will just end up letting it go to foreclosure. This means that Orlando REO realtors would be busier than ever.
Deep down I truly believe that this law will be extended, it just makes good business sense for everyone involved… sellers buyers, and lenders. Orlando real estate is moving right now and a big part of that is because of the short sale inventory.
If you are considering an Orlando short sale on your house, don’t take a chance on the mortgage debt relief act of 2007 being extended. Consult with an Orlando short sale specialist and find out what your options are now or you might regret it.
Orlando Short Sales becoming a popular target for Scammers
There’s a scam out there for everything and the world of Orlando real estate is no exception. Recently there’s been an outbreak of people trying to pull scams with title companies and short sales, here’s how it works. Scammers are mimicking major lender’s approval letters, including similar language and the bank’s logo. The letters look soo real that they’ve actually gotten away with it several times.
In some cases these scammers or “scumbags” use short sale approval letters that they fabricated to carry out there schemes. The result is that Orlando homebuyers purchase homes that they thought they had clear title to when in reality these properties where not only devalued but had huge liens attached to the property.
In other instances these scammers go so far as to assume the identities of unsuspecting Orlando homeowners or sometimes pretend to represent short sale lenders issuing bogus payoff letters approving short sales for ridiculously low amounts. These scams allegedly have resulted in more than $10,000,000.00 in losses.
In a short sale, a seller has the lender’s permission to unload the home for less than what’s owed on the mortgage.
It seems that luxury Orlando homes are the biggest target for these types of swindlers because they get bigger payoffs… when it actually works.
The reason these scams work is because of a huge lack in communication between title companies and short sale lenders
According to Mortgage Daily.com., Florida tops the nation in mortgage fraud, The Dallas-based trade publication said more than $260 million worth of fraud was being investigated in the Sunshine State at the end of the first quarter of the year.
If you or someone you know are involved in any kind of Orlando real estate transaction, make sure that you’re working with a proven Orlando realtor.
By now almost everyone is familiar with the term “Orlando Short Sale” that owns real estate in Orlando. In a nutshell… It’s when the bank agrees to take a substantial discount on what is owed on a delinquent mortgage. Our office has been receiving a ton of calls and emails lately from sellers that are upside down on their mortgage all asking the same question. “ Are we still in time to do a short sale on our home without being taxed by the IIRS for the deficiency?” The simple answer to this question is yes, as long as you get it closed before 2013. However, there are many other things to consider besides the “Mortgage tax relief act of 2007”. 6 things that could kill your Orlando Short Sale
1- The Bank refuses to take accept the short sale offer- These days this doesn’t happen that often. However, Some lenders are just not realistic when it comes to what the property is actually worth and they will just flat out refuse to do a short sale. 2- Stubborn Homeowners Associations- In the state of Florida, HOA’s will be paid 1 year of dues if a property goes to foreclosure. However, for some reason, that I’m still trying to figure out, there are HOA’s out there that would rather let the property go to foreclosure and collect a year of delinquent dues instead of collecting an amount that is much more than that. It’s almost like the HOA’s take it personal that a homeowner can’t pay and they want revenge! 3- 2nd mortgages not giving enough of a discount- When you do an Orlando Short Sale on a house that has 2 or more mortgages, the amount that you offer to that second mortgage holder as to be approved by the first mortgage holder. If the frst mortgage holder only wants the second to get $2,000.00 and the 2nd mortgage holder wants $5,000.00 guess what? That’s right… it’s a deal killer.
4- The BPO Comes in Too High- Part of the process when doing an rlando short sale is for the bank to order a BPO [Brokers Price Opinion]. Kind of like a mini appraisal, a BPO is usually performed by a local realtor that goes into the house and records details of the house damages, upgrades, etc. Based on all of this information the BPO agent will determine what they think the house is worth. Unfortunately, I’ve had BPO’s done on properties where judging by their valuation of the property, they must have been either 5- intoxicated or the more likely scenario, they want the property to get foreclosed on in hopes that they get the listing on the property from the lender as an REO listing. 6- The buyers back out or are unable to close- Usually, you’ll know way ahead of time if you’re dealing with a legitimate buyer as opposed to a tire kicker because of a Deposit and proof of funds or a pre-approval letter. However, for whatever reason, a buyer will sometimes just not want to go through with the deal at the last second or their financing falls through. Unfortunately, It’s just the nature of the Orlando Real Estate business.
Hire an Orlando Short Sale Expert
If you’re in need of doing a short sale in Orlando, you should find an experienced short sale realtor to give yourself the best chance possible. Short sales can be tricky and hiring a good realtor will the key to your success.
Orlando real estate is once again a good investment for retirees
After the huge real estate bubble, we experienced between 2000 thru 2006, we all learned a painful lesson in 2007 when the market tanked. It’s just not normal for Orlando real estate prices to double over the course f only seven years. When the market crashed, Orlando’s real estate prices dropped to 50% of where they were and in some areas of Orlando, it was even more than that.
What I have been seeing more of recently, however, is that people are considering Orlando realty as a good investment for retirement once again. Here in Orlando, the bottoming process has already happened and prices have been on a steady rise. There is still a long way to go before we see a normal housing market, however, historically low mortgage rates are helping the market by making the cost of ownership more affordable, assuming that the potential buyer can qualify.
Sensing this opportunity, many are jumping into the rental market to boost retirement savings and income. There are however several important factors to consider when buying an Orlando property for the purpose of receiving a steady stream of income.
5 Tips for potential Orlando Landlords
1- Make sure that you buy at the right price- This is where working with an experiencedOrlando realtor will pay off big. Make sure your agent shows you the recent comparables in the area. Chances are that you won’t find anything at 30% market value unless it needs work done, but you should be able to buy something at fair market value, which is OK if you’re thinking long term.
2- Forget about flipping- The days of flipping houses for a huge profit are gone for the most part and you shouldn’t go into this thinking that you will be able to sell your investment property for twice what you paid for it in six months, it’s just not going to happen.
3- Take advantage of Historically low mortgage rates- Even if a potential home buyer is able to purchase an Orlando Investment property, I always suggest to them that they should consider getting a mortgage. With historically low rates right now, it’s a great opportunity for potential investors if they can qualify.
4-Consider hiring a property management company- Being a landlord can be a great source of income if you’re up to the task. However, I must warn you that it’s not for everyone. Landlords have to deal with not only the maintaining of the property, but they have to be available to tenants at a moment’s notice in case of emergencies. This is why you should consider hiring a property management company right from the start. You should work this expense into your budget before even buying your investment property so that you will know if the numbers make sense.
5-Get familiar with Orange county eviction laws- If you become a landlord for any amount of time you can expect to have a deal with an eviction or two [at least]. It’s very important that your rental agreements are solid and that you do background checks on ALL of your tenants no matter how nice you think they are. It may cost you a few extra bucks to get a quality tenant into your house but I can tell you from experience that paying a bit more upfront to do things correctly will save you time, money, and headaches in the long run.
It’s important for people considering Orlando real estate as retirement income to remember what the goal is. The goal is for the owner to be mortgage-free and to collect a steady stream of income on a house that’s free and clear.
By now just about everyone living in Orlando has heard of terms such as “short sale” , “deed in lieu”, loan modification, etc. It’s important to know exactly what the difference is between these terms are and what the implications are. For example; many homeowners believe that a deed in lieu is the same as doing a short sale. This couldn’t be further than the truth. A deed in lieu is simply put is a foreclosure with a smile on it’s face or a “voluntary foreclosure”.
An overlooked downside to a deed in lieu of foreclosure is the possible forgiveness of the deficiency balance. Under federal law, a creditor is required to file a 1099C whenever it forgives a loan balance greater than $600. This may create a tax liability for the former property owner because it is considered “income.” However, the Mortgage Forgiveness Debt Relief Act of 2007 provides tax relief for some loans forgiven in 2007 through 2012.
The key issue in a deed in lieu of foreclosure is whether the lender is willing to forgive the deficiency balance. Make sure to read the contract carefully to see how the deficiency balance issue is handled. If the document is unclear, take it to an experienced Orlando real estate attorney with experience in property law. An attorney’s time is not cheap, but will be a bargain compared to signing an agreement you do not understand and are surprised later to realize its implications.
Consider Doing an Orlando Short Sale Instead of a deed in lieu
I’ve had a countless number of Orlando homeowners over the years come into my office asking me to explain the difference between a deed in lieu and a short sale. By doing an Orlando short sale the lender agrees to accept less than the balance owed on the mortgage at sale. The deficiency balance may be forgiven and you also may qualify for a “Cash for Keys” program which means that by doing a short sale, your lender may give you a cash incentive [between 3- 30 thousand dollars] . On the other hand a deed in lieu of foreclosure is basically a voluntary foreclosure n which you sign the deed over to the lender and walk away. However, a foreclosure, unlike a deed in lieu of foreclosure, the ownership of the property is not transferred to the mortgage holder, and remains with the owner.
The lesson here is if you are considering either a deed in lieu of foreclosure or a short sale you must review the terms and conditions carefully and make certain you understand whether the deficiency balance is forgiven. This is why it’s absolutely crucial to consult with an Orlando Real Estate expertwhen making such an important decision.
Lenders prefer short sales over taking a property to foreclosure because they don’t want to own distressed properties. They would much rather see the owner sell the property and lose the deficiency balance than be forced to take the property through foreclosure, as foreclosure is a costly and time-consuming process.
Another reason to consider a Orlando short sale over a foreclosure is that Foreclosure auctions tend to bring significantly less money than a normal sale would bring. If the sale brings less than the amount owed on the loan, the remaining balance of the loan is called a deficiency balance. This means that you could end up with a deficiency judgment against you for the balance.
If you still have questions about Orlando short sales, come see us for a free consultation. We’ve been specializing in Florida short sales and our team of Certified Distressed Property Experts are up to date on the latest laws and regulations when it comes to Orlando real estate ensuring that our clients get the best options available to them.
