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A Reason Why Short Sales Make Our Real Estate Market Sicker!
What is a short sale? A short sale is a method of paying a mortgage off for less than the balance. Example You owe $300,000.00 and someone purchases your house for $179,000.00. The unpaid balance of $121,000.00 isn’t required by the bank to be paid to purchase the house. Usually this is done with a new buyer.
The bank usually gives the home owner a 1099 at the end of the year for the unpaid balance. This is a frightening thought. With that said a CPA or the Irs can advise you if this would be an issue. What I’ve seen is that the person gets the 1099 but if they don’t have any assets then the IRS usually forgives that amount of money and don’t apply it to your income. People feel relieved when that happens. Yes, they have a way to get out of the house and life goes on..
What this does to the housing economy isn’t good. An example of one house that I saw was sold for $200,000.00 when the house across the street is valued at $563,000.00. The person buying the house is lucky, they can turn around and get some profit right away. Specifically I made an offer on a house that was listed for $275,000.00. My customers and I went to look at the house and I knew right away that this house was definitely worth more than $200,000.00. As my buyers walked into the door they noticed the white marble felt very luxurious as they tip toed across this beautiful floor. Exciting as it was my buyer decided to make an offer. At the time my buyers made the offer the house was active in the multiple listing service. I wrote the offer my buyers signed the paperwork and I submitted it to the listing agent.
I called the listing agent who said to me I’m sorry but my sellers had accepted an offer a while back and the bank wasn’t sure they were going to take the offer however now the bank may take the offer. The agent said the offer that had been submitted was very low according to the listing agent. The agent told me that my offer wouldn’t be seen by the bank but candidly she said to me your buyers can purchase this house from my new seller for the same offer that you just submitted to me.
Wow I thought why should my buyers pay $75,000.00 to the new seller? How can this agent feel good about representing her old sellers and how can she justify this to the bank? The bank could have been shown my offer and gotten at least $75,000.00 more for the home. The mortgage that was short sale was $340,000.00. The bank lost a total of $170,000.00. All these thoughts went through my head and I presented this situation to my principal broker who said it’s not illegal.
What do you think? Please comment. What we need to do is roll back these mortgages so that this kind of thing doesn’t happen. The effect it has on the economy and communities is devastating to say the least.
Of course there are more honest agents than dishonest agents the short sales just give more opportunities for people to become corrupt and justify their means to make money to pay their mortgages. This article is my opinion regarding what I’m seeing in today’s Real Estate Market.
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