Thursday, November 22, 2012

Thanks and Hope


I was reading the editorial page of The Wall Street Journal on Wednesday.  They published a couple of editorials that they have run every year on the day before Thanksgiving since 1961.

The first is from the record of the colony at Plymouth Rock.  Although it made me pause to consider what those pioneers faced back then, and why they had reason for thanks when their first harvest came in. However, it was the second article that caught my attention.

"…we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure."

I confess, I was disappointed in how the election turned out.  Since then, many of those who send me emails and messages have been forecasting doom and gloom.  However, I am not ready to surrender to despair. 

The reason I am not ready to join the doomsayers and forecast the end of America as we know it is because I believe what that editorial author said, the true richness of this country is in the people of this land, rather than its natural resources, regardless of their abundance.

In short, I believe in people.  I believe in the resourcefulness and ingenuity of people.  I also believe that the United States of America provides the best environment for individuals to employ their creative abilities to overcome every obstacle.

This is true both individually and collectively.  In other words, we have the abilities to overcome our personal obstacles as well as those facing our society.  Many times to overcome our personal obstacles we need help from others.  There is nothing wrong with that. In fact, our ability to help each other is one of the things that makes us truly great.

I have been helped many times by others.  I also get a great deal of satisfaction by helping others to succeed at getting and keeping the life they want.  That is why I do what I do.

If you need help to get and keep the life you want, I am here to help.


Tom Sheppard is the author of "Fire Yourself: Get the Job You Want" available from XLibris Press. Tom has been successfully investing in real estate since 2001 while working part time. In 2008 he left a six-figure job as an enterprise project manager with a major national bank to manage his real estate business full-time. His goal is to help 100,000 people find peace of mind by finding quality, affordable homes. He is currently looking to expand his network of funding partners who are helping him achieve this goal. If you would like to know more about how you can Do Well By Doing Good (TM), go to www.CharlotteWealthPartners.com


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Friday, November 16, 2012

Fiscal Cliff for Short Sales?


Short sales are very popular right now.  In fact, they account for about 1/4th of all home sales occurring right now.  A short sale can be a good way to buy a house at below market prices but it is not for the impatient or faint of heart (www.buybelowmarket.com). In case you aren't sure what a short sale is – it is where the owner of a home sells their home for less than they owe the bank and convinces the bank to accept that payment to release their lien against the house.

The difference between what the seller owes and the amount the bank is paid is called a deficiency.  Traditionally, the bank has a couple of things it can do with that deficiency.

  1. They can go to court and get a deficiency judgment against the seller.  This judgment will allow them to attach to other assets the seller has to try to get their money at a later date.
  2.  They can forgive the deficiency.  When they do this, they issue a 1099 to the home seller. George W. Bush signed legislation which waived the tax implications to home sellers (not investors) who got a 1099 on a short sale.  Before that, the IRS would then come after the home seller for taxes on the amount of the deficiency as though they had received the deficiency in cash.
  3.  They can write it off and eat the loss without issuing a 1099. This doesn’t happen often and may be illegal.
 
The legislation that George W. Bush signed in 2007 (the Mortgage Debt Relief Act) was extended through 2012.  It is now about to expire and although there is support for extending it, there are no guarantees when common sense meets politics. The law was extended in 2010 but is due to expire at the end of the year unless Congress acts to steer away from the so-called “fiscal cliff.”  Separate bills have been introduced in the House and Senate to extend the mortgage relief tax break for another year. The measure would cost about $1.3 billion in uncollected taxes.

Expiration of the tax treatment would create a major new headache for the one in four homeowners who owe more than their house is worth. Those "underwater" sellers would have to come up with a big check for Uncle Sam to pay the tax on the difference. That “would be a blow to the housing recovery,” said Paul Diggle, a housing economist at Capital Economics. “The increased use of short sales, rather than foreclosures, has become an important support to the recovery.”

Bank of America Wednesday reported that some 62,000 borrowers have completed short sales that saved them $7.4 billion in debt, or an average of about $120,000 each.

The law is credited with helping pull the housing industry out of the worst recession in nearly a century. Though still deeply depressed, sales of both new and existing homes have been steadily rising. Home prices appear to have bottomed out and are rising again in many parts of the country.

Restoring the tax on debt forgiveness could throw cold water on one in four home sales by sticking the seller with a large tax bill. “If (homeowners) decide that a short sale is not the best option, and they just allow (the mortgage) to be foreclosed, that has a more negative impact on the neighborhood and on home values,” said Blomquist. That would be bad news for lenders, too.

The average price of a bank-owned property seized in foreclosure is about $30,000 lower than comparable house transferred in a short sale. Banks also avoid the legal costs of seizing a home and the extended cost of maintaining it. “(A short sale) really does work out to both the borrower’s and lender’s benefit in most cases,” said Michael Fratantoni, a research analyst at the Mortgage Bankers Association.

As an investor, although I recognize the value of short sales, I stay away from them.  As I mentioned, they are not for anyone who needs to buy a house right now and wants to get a bargain.  I have a connection to a service that will handle short sales for me, but short sales take a long time and most end up failing.  All too often the bank forecloses even while the short sale is being negotiated.  In some cases, they have rejected a short sale offer only to foreclose and sell the house for less than the short sale offer.

When working with a potential seller who is underwater on their mortgage, I will always educate them on the short sale option (along with other options), although I seldom offer to buy their house on a short sale.  In most of those cases, I would rather wait until the foreclosure happens and all the junior liens are wiped out and the bank is facing the additional costs of holding the property in the face of a less than favorable market.

If you know anyone who is looking to buy a house at below market prices, encourage them to go to www.BuyBelowMarket.com.  The Gold Seal Homes Group (www.theGoldSealHomesGroup.com) buyers are constantly working the Charlotte market (including Mecklenburg, Cabarrus and Rowan counties) and buying houses at below market prices.  They make sure the houses have clear title and are in good condition and then sell them at a discount to people who want to own their own homes. In some cases, they can even arrange for seller-financing or rent-to-own programs for those who cannot get a bank loan right now.

If you are wanting to invest in real estate, please contact me at Charlotte Wealth Partners (Tom@CharlotteWealthPartners.com) and I will help you.  If you don't know what to do, I can guide you.  If you are already familiar with the risks of real estate investing, I can connect you with people who can provide you with a variety of real estate investment opportunities, ranging from totally passive, risk-managed investments, through turn-key rentals and right up to your own fix-and-flip opportunities.


Tom Sheppard is the author of "Fire Yourself: Get the Job You Want" available from XLibris Press. Tom has been successfully investing in real estate since 2001 while working part time. In 2008 he left a six-figure job as an enterprise project manager with a major national bank to manage his real estate business full-time. His goal is to help 100,000 people find peace of mind by finding quality, affordable homes. He is currently looking to expand his network of funding partners who are helping him achieve this goal. If you would like to know more about how you can Do Well By Doing Good (TM), go to www.CharlotteWealthPartners.com