Archive for the 'Short Sales/Foreclosure' Category

Minneapolis Duplex Short Sales Taxable: For Now

said on January 16th, 2014 categorized under: Short Sales/Foreclosure

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duplex foreclosure taxableAs the duplex foreclosure crisis wears on, one of the most important things we often forget is traditionally, the forgiveness of mortgage debt through a short sale or foreclosure is a taxable event.

The Mortgage Debt Relief Act of 2007 made forgiven mortgage debt tax-exempt. In order to qualify, the debt had to be on a principal residence, and the amount owed could not exceed $2 million.

On December 31, 2013, this tax exemption expired.

And to date, no extension has been passed.

On Tuesday, Congressmen Bill Foster (D-Illinois) introduced the Homeonwer’s Debt Relief Extension Act, which would extend the exemption for two more years.

To offset the extension, the bill calls for the repeal of a tax break for oil and gas companies.

Keep an eye on the bill, More importantly, if you’re facing losing your duplex or home to foreclosure, or the necessity of a short sale, be sure to consult your tax professional first so you’re fully informed of any tax consequences.

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fairy godmotherEvery now and then, Minneapolis duplex owners facing foreclosure get a wish granted.

Like Cinderella, they’re always skeptical at best.

What’s the miracle? For some unknown reason, their lender decided to bid less than the amount of their loan at the Sheriff’s Sale and that new number is now the amount they owe on their first mortgage.

In other words, if they can come up with that amount during the six months the state of Minnesota allows as a Redemption Period, they can either keep their property or sell it for a profit.

Before you get too excited, know that it doesn’t happen very often. I watch this pretty closely and while I haven’t kept count, my guess it’s maybe one out of every 30 duplexes that go to auction at the Sheriff’s office.

For the duplex owners who hear me out, this can completely turn everything around. One owner I helped pocketed $85,000, another $45,oo0.

It sounds too good to be true. And most Realtors don’t know about it. I love that. It means I get to play Fairy Godmother.

FHA Rejects Minneapolis Duplex Short Sales

said on January 3rd, 2013 categorized under: Short Sales/Foreclosure

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NoIf you’re behind on your duplex payments, and are considering a short sale, you may need to act fast.

Specifically, local attorneys who specialize in negotiating short sales have begun to see a disturbing trend with FHA and VA mortgages. Simply put, if the sheriff’s sale has occurred, most banks are refusing to negotiate a short sale.

In Minnesota, the sheriff’s sale is usually scheduled when a duplex owner is six months behind in mortgage payments. While most short sales and foreclosures in recent years have in fact taken much longer than this, it is best to prepare as if the lender will work within the time frames allowed by law.

The first thing a distressed duplex owner must do is find out whether or not the sheriff’s sale has occured. The bank is required to inform the property owner of the first scheduled sale. If  the sale is postponed, the lender is not required to formally notify the seller.

If the sale has happened, it’s important to contact the lender to obtain confirmation that they will still consider a short sale.

If the sale hasn’t occurred, duplex sellers should contact their lender to begin the short sale pre-approval process. If the seller is eligible, the lender will order an appraisal and issue an “approval to participate” document.

This letter will state what the approved sales price is. It’s important to note, however, that it will not stop the short sale process.

If there isn’t time to complete the FHA pre-approval process before the sheriff’s sale, or the seller has a VA loan, the duplex owner may be able to get the sheriff’s sale postponed five months, provided they live in the property. However, obtaining this extension must be done at least 15 days before the sale.

If you’re a duplex seller facing foreclosure, it is probably best to get seasoned professionals on your side, who can help guide you to resources and through the difficult months ahead.

Please don’t hesitate to contact me for solutions.

Freddie Mac Breaks Up Minneapolis Duplex Party

said on November 15th, 2012 categorized under: Short Sales/Foreclosure

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duplex party timeJust when we were starting the party for the return of the Minneapolis duplex market, Freddie Mac called and asked us to turn down the music.

In fact, according to their November Housing Market Outlook, if trends continue along their current trajectory, we can celebrate a full recovery in 2017.

Yes, Freddie says, there were seven consecutive months of positive gains through August. Yes, home sales through the first nine months of the year were up 9 percent from last year and on pace for five million units but…

There’s those nagging issues of 7 percent unemployment and modest family income growth, which have put something of a damper on the formation of new households.

It seems the rate of household growth during the housing collapse of 2007-2011 ran at a paltry .5 percent per year. Between 1990 and 2006, that figure ran closer to an average of 1.2 percent. Over the last four quarters, we’ve seen that figure around 1 percent. Encouraging, but there’s still a lot of making up to do.

In its caution, Freddie is also taking into account demographic shifts among Generation Y and the Baby Boomers. It appears the former are living with mom and dad longer. Meanwhile, the Boomers are delaying buying retirement homes — because their kids are still living with them.

Freddie’s report did offer one reason to celebrate. They actually believe we will see house and duplex prices appreciate at a rate of about 3 percent a year.

Since that’s a whole lot better than declining values, I say, party on!

Minneapolis Duplex Foreclosure Freeze Thaws

said on January 3rd, 2011 categorized under: Short Sales/Foreclosure

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seated snowmanIt may be cold outside, but last month, Bank of America rather quietly thawed out its national duplex foreclosure freeze.

What does this mean to you?

Well, in south Minneapolis and parts of St Paul alone, I can can think of at least 15-20 duplexes that were slated to go to Sheriff’s Sale last summer and because of the “robo-signing controversy” and subesequent foreclosure moratorium, didn’t.

But they are going to Sherif’s Sale in January and February.

Which means they will either hit the market as short sales or, more likely, foreclosures. The short sales will happen this spring.

Property owners have six months to redeem the amount bid at the Sheriff’s Sale, and if they fail to do so, the bank takes control of the property.

These duplexes should start hitting the market in mid-summer to early fall.

If you’re a seller, this means you should think about getting your property listed before the wave of foreclosures comes ashore.

And if you’re a buyer, you should align yourself with a Realtor who, as a result of specializing in duplexes and distressed properties,  knows where they are and can help you pre-empt your competition for those that are especially good values.

As I said, I know of at least 15 – 20 already!

Facing Duplex Foreclosure? There's Always Hope

said on December 30th, 2010 categorized under: Short Sales/Foreclosure

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Climber on the summit of a rock spire.I spoke with a duplex owner facing foreclosure the other day.

He’s in the last three months of his redemption period and time is running out.

I tried to reach him months ago to see if I could help him avoid foreclosure.

I didn’t hear from him.

I tried again recently, and he responded.

He confessed to being depressed and overwhelmed by the stress of near unbearable financial hardship. Totally understandable.

But when I suggested we do everything we could to keep him from foreclosure and all its consequences, he was resistant. Basically, with so little time left, he wondered why he should even try.

In Webster’s dictionary, the fifth definition of the word “try” is “to make an attempt at”.

In his case, an attempt to change his financial future, possible tax consequences, and long term credit damage caused by foreclosure.

I encouraged him to take a chance and simply try.

After all, whether it’s in real estate or life, we never know all we’re capable of until we attempt it.

Sometimes it’s infinitely more than we ever expected.

And if we fail, at least in this scenario, failure results in foreclosure; an outcome he expects anyway.

But if we succeed, he may be able to buy a property again in two years. With a foreclosure, he’s staring at seven.

Isn’t that worth an attempt?

I think so.

I hope he does too.

Winter Duplex Dam Sure To Cause Spring Flooding

said on December 17th, 2010 categorized under: Short Sales/Foreclosure

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floodYou’ve probably heard some lenders have put a temporary stop to duplex foreclosures while they investigate and review the potentially fraudulent practice of robo-signing the paperwork.

And odds are, you think this a good thing.

I do too. Well, sort of.

While it’s important that banks obey the law and foreclose only on those who have legitimately defaulted, in the end, I think we’ll all find there are a lot more of those kinds of people than there was fraud.

And what happens come spring when those properties hit the market along with all the others?

According to Realty Trac’s Rick Sharga, “There are five million loans that are seriously delinquent right now and not yet in foreclosure. A large, large number of those will hit the foreclosure pipeline next year. So 2011 is probably going to be a little bit worse than 2010.”

That, of course, will probably result in far too much inventory on the market, adding even more downward pressure on prices. 

In other words, if you’re considering selling, you might want to get out ahead of the flood.

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Winner at vw showI’ve heard it said that the word FEAR is an acronym for False Evidence Appearing Real.

And if you’re facing foreclosure, it’s a helpful acronym to remember.

A property owner who’s in the process of readying a property for a short sale called this morning. The absolute terror in her voice was palpable.

It seems the bank had called her husband and threatened to not only sue them, but garnish his wages.

And he believed them.

Their subsequent panic caused them to imagine all sorts of horrors; including sleeping under a bridge and living out of a VW van. This, when they’ve already found a place to rent and have moved in.

While I’m not an attorney, it’s important to bear in mind that Minnesota, Alaska, Arizona, California, Connecticut, Florida, Idaho, North Carolina, North Dakota, Texas, Utah and Washington are non-recourse loan states.

In other words, the bank can’t come after them for any remaining debt after a short sale or foreclosure. The debt is tied exclusively to the property, not the owner; unless that indebtedness is the result of a second mortgage or Home Equity Line of Credit (HELOC).

The bank’s collection agent, of course, wants to recoup as much money as possible for the bank. And But they have to do so within the confines of the law.

Remember,  if your property is in the process of foreclosure, the very worst thing that can happen is the bank takes ownership, your credit is damaged for seven years and you may owe some taxes on the part of the property that was an investment.

Granted, those aren’t anything to take lightly. But life will get better once you get out of a mortgage you can no longer afford.

There is hope and life after a short sale or foreclosure. Things will get better. I promise.

What Happens With Every Missed Duplex Payment?

said on November 22nd, 2010 categorized under: Short Sales/Foreclosure

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Short Sale Real Estate Sign Isolated - LeftHow many duplex payments are you behind?

The answer tells me almost everything I need to know to short sale a Minneapolis duplex.

While each lender has its own rhythm and schedule, there is largely a predictable pattern of what happens as property owners miss more and more payments in the state of Minnesota.

(Please note foreclosure timelines and practices vary by state, so it’s important you check with someone in your specific area as to which guidelines apply to you.)

According to the Minnesota Home Ownership Center, the following is an average timeline for the foreclosure process in Minnesota:

1st Missed Payment – At this point, the lender generally calls the duplex owner and follows up with a letter reminding them about the overdue installment.

2nd Missed Payment – The calls and letters continue, with one of those correspondences being a thirty day default letter.

3rd Missed Payment – Attempts to collect continue, but at this juncture, things begin to change. The account is usually transfered to the foreclosure department, with a “Notice of Intent to Foreclose” sent to the duplex owner.

4th Missed Payment – Things start getting expensive with the fourth missed payment, as this is when the account is forwarded to a foreclosure attorney who, of course, starts charging legal fees; fees that are added to the property owner’s debt. The attorney starts earning his or her keep by sending a notice to the duplex owner.

5th Missed Payment – Matters become more serious with the fifth missed payment, because it’s at this point that the attorney schedules the Sheriff’s Sale. Once the sale is scheduled, notice of it is published for six consecutive weeks, usually in publications like Finance And Commerce or Capitol Report.

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Can You Rent Your Short Sale Duplex?

said on November 18th, 2010 categorized under: Short Sales/Foreclosure, Tenants

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for rentThe other night I stopped by a Minneapolis duplex to see if I could help the owner avoid the potential credit and tax consequences of foreclosure.

Guess what I saw in the front yard?

A “For Rent” sign.

Mind you, the sheriff’s sale has already happened on the property; meaning the owner has six months or less to either redeem the loan or lose it to the bank.

And the owner is within his rights to collect rent (unless the lender has told him otherwise).

But if you were a tenant and knew the duplex was in foreclosure, would you want to move in? If so, would you expect a discount on the rent?

Perhaps the owner simply planned not to tell them.

Trouble is, Minnesota state law requires him to.

A duplex owner in foreclosure must notify a prospective tenant, in writing, not only that the building is in foreclosure, but also the date the redemption period ends.

What’s more, the owner cannot lawfully sign a lease that extends beyond that redemption period.

So what’s the worst that can happen? After the bank reposses the duplex, the tenant can sue the landlord; not only for rent, but also for defending against an eviction case brought by the bank.

Seems to me like this guy’s got enough trouble already.