Posts Tagged ‘short sale’

Lemonade Courtesy of the FHA: 90 Day Anti-Flipping Restriction Waived

Wednesday, February 10th, 2010

Lemonade StandGreat news for real estate investors and flippers who were once restricted with the 90 day FHA anti-flipping regulations. Due to the increase in the volume of foreclosures over the past two years, the Department of Housing and Urban Development recently announced that they are waiving the 90 day flipping regulations in 24 CFR §203.37a(b)(2) in order to permit potential buyers greater opportunities to purchase homes and obtain FHA financing.  The waiver became effective on February 1, 2010 and will expire on January 31, 2011.  This regulation previously restricted the eligibility for end-buyers to obtain mortgages insured by FHA when these properties are re-sold within 90 days following the original acquisition of the property by the seller.  This waiver is limited to re-sales that are sold at an arms-length transaction.

There are two caveats to this waiver that you must be aware of.  The first caveat is that the waiver is limited to forward mortgages, so it does not apply to Home Equity Conversion Mortgages.  The second caveat is when the sales price of the property is 20% or more over and above the seller’s acquisition costs, the waiver will only apply if the new buyer’s lender:

(1)     Justifies the increase in value by retaining in the loan file supporting documents and/or a second appraisal verifying that the seller has completed sufficient legitimate renovations, repair and rehabilitation work on the subject property to substantiate the increase, or the appraiser provides appropriate explanation of the increase in property value since the prior transfer of title; AND

(2)     Orders a property inspection and provides the inspection report to the purchaser before closing.

A.     The lender may charge the borrowers for this inspectio

B.     The inspector:

  • Does not have to be an FHA-approved or a 203(k) consultant
  • Must have no interest in the property or relationship with the seller
  • Must not receive compensation from any other party other than the lender
  • May not compensate anyone for the referral of the inspection
  • May not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection.

C.     At a minimum the inspection must include:

  • The property structure, including the foundation, floor, ceiling, walls and roof;
  • The exterior, including siding, doors, windows , appurtenant structures such as decks and balconies, walkways and driveways;
  • The roofing, plumbing, electrical, heating and air conditioning systems;
  • All interior; and
  • All insulation and ventilation systems

So to all of you real estate investors… go ahead and buy these lemons and make a profit by selling lemonade.

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Posted in Entrepreneurial News, Florida Law News, Florida foreclosures, Florida real estate, Florida short sales, Real Estate Closings, flipping | No Comments »

Why Oppenheim Law Prefers Short Sales Over Florida Foreclosure

Tuesday, January 26th, 2010

Some Florida attorneys and other experts sometimes seem to suggest there is no difference between having a Florida foreclosure or Florida short sale on your record or credit report and pose the question:

“Why go through the hassle of a short sale?”

The thought process might be technically correct, but only in a state described as a “non-recourse state.” Florida is not one of those states and is in fact a RECOURSE state. This means the banks can and will likely come after you for the difference between the principal value of your Florida mortgage and the value of your home at the time of the Florida foreclosure sale.

In non-recourse states, like California, people can walk or stay, and either way the banks cannot come after you. In Florida, New York and other recourse states the banks can come after you for as long as 20 years. The banks have the right to try and garnish your wages and bank accounts and even depose you under oath. In fact they can and will likely come after you even if you are long dead. You can read my Op-Ed piece in the Sun-Sentinel for a more detailed description of the difference between recourse and non-recourse states.

However, if you get out by orchestrating a South Florida short sale, you’ll likely be released from the amount the bank does not recover at closing. In fact the reason it is called a “Short Sale” is because the bank is coming up short at closing.  Now the Bank has a few options. They can take the hit as they do frequently, and as they may well be required to do according to new rules coming out of the Obama Administration, or they can negotiate some payment plan with you. Sometimes the terms are good, and other times they are truly oppressive. However, remember whatever you negotiate is not written in stone or blood and is unsecured.

Thus, the Bank will likely sell the Note (here we go again) to a hedge fund, or collection agency for pennies on the dollar. So you once again will have an opportunity to renegotiate the terms. And even if you don’t make any payments at all, are the banks really going to spend thousands of dollars to find you, serve you and hire attorneys to sue? Maybe… but my bet is they will first go after the low hanging fruit: the poor folks who never read the Oppenheim Law blogs and now have deficiency judgments entered against them.

So, to recap, The Oppenheim Law bottom line:

Explore a short sale first before throwing in the Florida foreclosure towel.

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Posted in Florida foreclosures, Florida real estate, Florida short sales, Foreclosure Defense, short sales | 1 Comment »

Oppenheim Law Explains How Short Sales and House Flipping Can Bailout South Florida Homeowners

Tuesday, December 8th, 2009

WSJ reporter, James Hagerty, arguably one of the best reporters covering the real estate crisis and with whom I speak with from time-to time wrote a great article this morning concerning professional investors who are going to auction, fixing up the houses and then flipping them for a profit.  (Also take the time to look at the slides and related comments).

Unlike the flippers of the past, these folks are true professionals as this IS their business. They are not cops, firemen or teachers by day and flippers by night.

In fact, OppenheimLaw and Weston Title represent a number of these types of professional groups. They are all well funded and clearly taking advantage of the fact that the Banks are drowning in too much stuff and thus many times are clueless to the true value of an asset.

Further, as we have explained before, the Banks would rather get back cold cash now than continue trying to make old loans work through loan modifications, when they know the likelihood of re-default remains high.  That is why we at OppenheimLaw and our sister title company, Weston Title, are calling 2010 the “Year of the Short Sale.”  Banks actually still do about 20% better according to a recent Federal Reserve study when they allow a short sale to proceed as opposed to the Bank proceeding all the way through the foreclosure process. Of course with millions of homes that have already been foreclosed upon by the Banks, the Banks have to somehow get rid of their unwanted inventory.

One word of caution: if you are thinking of becoming a “professional flipper” do your homework; and do not think for a moment that there is a title company out there that will allow you to use the funds from the final buyer as your source of funds to purchase the property at the courthouse’s steps or in a short sale. That practice is now dead.

Thus, if you are in a position to look at flipping as your way to help bail yourself out from being underwater to treading water with your head up high… call me!

Roy Oppenheim

From the Trenches

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Posted in Entrepreneurial News, Florida real estate, Florida short sales, Roy Oppenheim, flipping, short sales | No Comments »

Obama Administration Implements New Guidelines to Assist Short Sales

Wednesday, December 2nd, 2009

While mortgage modifications continue to be a huge problem for the Obama administration, they seem to be following the advice of the geeks at the Federal Reserve and from the folks in the “Trenches“. (See WSJ Article).  You are eligible to do a short sale if (1) you have a government backed loan (Fannie, Freddie, VA, etc.), (2) its your primary residence, (3) you have been turned down for a modification, and (4) you have had the property listed at market price. That means you may get $1,500 from the government upon closing and you get to Walk Away! No Deficiency!  Learn more about alternatives to foreclosure and defenses to foreclosure at our seminar tomorrow night at 6:00 p.m.

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Posted in Florida real estate, Florida short sales, Loan Modification | 1 Comment »

Oppenheim Law on Dating and Banking Relationships

Saturday, November 21st, 2009

Picture 6Why Gentlemen Prefer Blondes and Banks Prefer…Short Sales

It should come as no surprise that only 12.4 percent of Florida borrowers who are at least two months behind on mortgage payments have entered into trial loan modifications through the Obama administration’s Making Home Affordable program.

The first date
For many who tried to get a Florida loan modification, the process is like a bad first date that just won’t end.

When you first got your loan, the bank picked you up in its nice car and took you to a fancy restaurant. Things were going great, but then halfway through the evening, dinner, like the economy, took a downward spiral. In an attempt to save the date, you turned the conversation to other topics and tried to stay on neutral ground, thinking maybe this bank isn’t so bad. Maybe I’m just too picky.

Checking out the blonde across the room
So you changed tactics and decided to go for the loan modification in an attempt to smooth out the relationship. Except now the bank can’t remember your name, your loan or number, and won’t even consider qualifying you until you are in default. You get rejected once or twice before you wise up. You start sending the right signals, only to find that your bank, like your date, has moved on. The negotiator or customer service agent you have been working with has been transferred, just like your date’s eyes have transferred to the blonde across the room.

Becoming too needy
Although commentators suggest that it is the fault of the bank’s parents because they failed to properly train your lender or give your bank incentive to finish out the evening on good terms, the bank is really just playing the odds that there are many fish in the sea. In their eyes, it is purely economical to look at other options while they are still on a date with you.

Losing interest
Furthermore, the bank is not really interested in the same things you are. While you are looking for a nice meaningful relationship including principal reduction, the bank is only interested in one thing: lowering your monthly payment but keeping you locked to the full amount of the principal. Therefore, saving the relationship through mortgage modification, while a good idea, is not the strongest approach.

Cheating
A recent study by the Federal Reserve found that Uncle Sam was the best person to train your bank to deal with short sales. Without Uncle Sam’s influence, your bank is so awful that you no longer want to put in the effort to pay your mortgage. In addition, with things like unemployment and sagging real estate values, your bank is simply not keeping your attention throughout the night either. Furthermore, of dates that are saved through modification, studies suggest that 55% of them fail on the second try. Short sales benefit both parties: your bank is free to spend the evening with the blonde as a consolation prize, while you escape unscathed from a bad situation.

Keeping that in mind, your bank has ultimately decided that even if you save the first date through modification, the chances that the second date will tank are pretty high. Thus, the economic incentive for the bank to end the date and take home a sure thing is significantly higher than the risk of going home at the end of the night with nothing. And nothing is what they get if they let the whole relationship run its course into foreclosure.

Breaking up is hard to do…and expensive
There is still a chance for a peaceful break up. The short sale process allows the bank to avoid a losing streak of consistently ending dates in foreclosure, leaving homes vacant and disintegrating. Lenders are out looking for a sure thing, not a long time commitment of paying for upkeep of ex-wives foreclosures.

Although the short sale is not perfect and the banks still don’t handle them as smoothly as possible, to distressed daters it is a welcome relief. Assuming that the banks continue to cut their losses and take what they can get, they too might find that their own losses have significantly decreased by participating.

Relationship therapy…getting help
Anecdotally both Weston Title & Escrow and Oppenheim Law have seen a substantial increase in short sale activity as well as in the success rate of processing short sales.

While the short sale will not keep a failing date together, and you will likely leave the restaurant early, it will allow you to get out from under a bad situation.

Sometimes utilizing a Florida foreclosure defense associated with a short sale is a very effective means of fashioning your own bailout; especially when you know that banks and gentlemen prefer short sales.

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Posted in Florida Law News, Florida foreclosures, Florida real estate, Florida short sales, Foreclosure Defense, Roy Oppenheim | No Comments »

First Time Homebuyer Tax Credit Extended Into 2010! Plus…A New Tax Credit for Certain Existing Home Owners!

Monday, November 9th, 2009

Why say it yourself when someone has already said it!  Neil Solomon, my good friend, in the mortgage industry sent me this email and I thought I would share it with all of you.  It speaks for itself. But the good news is the government will actually pay YOU to buy a house! How nice is that!

First Time Homebuyer Tax Credit Extended Into 2010!
Plus…A New Tax Credit for Certain Existing Home Owners!

It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

  • You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
  • You do not use the home as your principal residence.
  • You sell your home before the end of the year.
  • You are a nonresident alien.
  • You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
  • Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
  • You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

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Posted in Florida Law News, Real Estate Closings | 1 Comment »

10 Inside Tips for Buying or Selling Florida Foreclosures, REOs, Short Sales

Tuesday, September 8th, 2009

If you missed last weeks real estate workshop, Roy Oppenheim discussed the current Florida real estate market and offered tips for homeowners to stay above water.

Roy offers a free foreclosure defense and real estate workshop on the first Thursday of every month, so make sure you check it out or send your friends next time around.

See below for the tips Roy shared at the workshop and a video of Roy discussing what to do when buying a foreclosure or short sale.

10 Tips to Survive Today’s Florida Real Estate Market

  1. Home prices will not increase until the foreclosure rate stabilizes. Watch out for median home prices, they can be very misleading.
  2. Sellers should accept multiple offers on their home when doing a short sale.
  3. To be approved for a short sale, the seller needs to provide a unique hardship (ie. Loss of income, family member becomes unemployed).
  4. Lenders can seek a deficiency judgement even after they issue a 1099
  5. Be patient and perform a scrupulous inspection. Roy’s special tip – Spec homes from a builder are your best bet.  You know what you are getting and often times builders offer great deals.
  6. Lots of opportunities are available for investors.
  7. In the process of foreclosure, defend your home and make the bank prove that they own the note.
  8. A homeowner is more likely to get a loan modification approved during foreclosure because of the likelihood of mandatory mediation.
  9. Lender’s will most likely not accept a Deed in Lieu if you have a second mortgage.
  10. In a Chapter 13 you can possibly wipe out the second mortgage on your home if the property is underwater.

For more insightful tips on real estate and the Florida foreclosure process visit: www.oppenheimlaw.com.

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Posted in Chapter 13, Deed in Lieu, Florida foreclosures, Florida short sales, Foreclosure Defense, Loan Modification | No Comments »

Deep Cleanings for Foreclosures

Friday, August 14th, 2009

Many people may be hesitant to believe that business is booming, but there is a particular profession that is; namely, Property Preservationists for distressed properties.

 

As reported in the August 13th Sun-Sentinel, foreclosures have tripled across the nation since 2005.  More and more of these properties are becoming REOs, or “real estate owned,” meaning the bank holds the deed. Before hitting the market, these foreclosed properties need a visit from a Property Preservationist for a ”deep cleaning.”  “Property Preservationists” swoop in to handle various tasks such as removing trash, mowing the lawn, boarding up windows, even asking squatters to find a new place of residence. One such Preservationist “deep cleans” between 10 and 20 REOs in a typical week, in addition to inspecting 90 structures and securing 20 others.

 

“Nobody likes to see me. But when a house’s teeth go bad, who else is going to clean out the rot,” states Nick Hazel, one such Preservationist. In 2009, 1 in every 33 homes in Florida is at risk for a visit by Hazel as 3 out of 100 homes are in foreclosure. Nationally, 1 in 84 is at risk.

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Posted in Florida Law News, Florida foreclosures, Florida real estate | No Comments »

Academy Awards, Super Bowl and Loan Modifications

Monday, February 23rd, 2009

Last night I actually watched the entire Academy Awards with my family. I don’t remember the last time I ever did that… from the opening number to the Best Picture. This year, I also watched the entire Super Bowl… This is very unusual for me. Then again… we are in truly unusual times. Both of these national events somehow seemed to bring comfort… like apple pie, or chicken pot pie to the national ethos. It felt like we are all one and share a common past time. Last night was truly entertaining, no unnecessary bad jokes or deriding cracks about our government.

But enough of that… lets get back to the issues at hand. On March 4, the Obama Administration will release its details concerning how folks will be able to modify or refinance their mortgages. According to the Sun-Sentinel and Zillow.com, only about 17 percent of South Florida will have enough equity in their homes to refinance. Of course, those won’t be the people facing foreclosure.

You can’t be more than 5 percent underwater. In other words, if your outstanding mortgage principal balance substantially exceeds the value of your home, you will either have to hold on for dear life, do a short sale, or hope that your bank comes to its senses and realizes that a foreclosure is not the answer and will modify your loan by taking a principal reduction haircut.

In fact, we are seeing an entire new industry emerging. Former mortgage brokers, bankers, realtors, real estate attorneys, and appraisers are beginning to organize to assist homeowners with their loan modification needs, especially once the government’s program is announced on March 4, 2009.

In fact on March 5, 2009 we will be conducting one of our monthly free Florida Foreclosure Defense Workshops.
In the mean time, it appears the new government program will be of no use to you if you fall into one of the following categories:

  • Investor Property
  • Second Mortgages, Equity Lines
  • Second Homes
  • Jumbo Mortgages
  • Too Little Income
  • Too Much Income

So… continue to stay tuned! In the interim, continue to enjoy events like the Oscars as they provide a good escape.

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Posted in Florida foreclosures | No Comments »