Looking Back on Short Sales & Looking to the Future of Real Estate

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Mortgage Forgiveness Tax Relief Act Extended

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In mid 2007, the real estate bubble burst and many homeowners were forced to do a short sale on their home.  As part of a wider piece of tax legislation, Congress has voted to extend the Mortgage Forgiveness Act to 2017.  This Act was originally passed in 2007, and protects the underwater homeowner from incurring tax bills on the debt forgiven during a short sale.  Three times now, the act has come close to expiring but with strong lobbying efforts from the NAR, the act has been extended.  Approximately, $75,000 in mortgage forgiveness is required in a short sale which could have cost a short sale seller upwards of $30,000 to $40,000.  Ed McFerran stated in 2015 5.6% of closed real estate transactions in Washington were short sales.  This number has declined from 9% in previous years.  Read More

Because I am not an attorney, I always recommend consultation from an attorney.  If a someone is considering a short sale, I would recommend researching options such as tax considerations, bankruptcy and loan modification optionsClick Here to get in touch with McFerran Law.

What Happened to the Consumer?

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Transunion recently released the results of a new study called “The Bubble, The Burst and Now – What Happened to the Consumer?”  The study revealed that 1.5 million homeowners who were negatively impacted by the housing crisis could re-enter the housing market in the next three years.  Read More

What are the Guidelines to Obtain lending after Bankruptcy, Bank Repossession or Short Sale?

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Foreclosure     

Conventional lending:  7 years from completion date or 3 years(extenuating circumstance)

FHA: 3 years from completion or 1-2 years(extenuating circumstance)

VA: 2 years from completion or 12-23 months (extenuating circumstance)

Short Sale       

Conventional Lending: 4 years or min of 2(extenuating circumstance)

FHA: 3 years or no wait period if current on mortgage/debts(extenuating circumstance)

VA: 2 years from completion or 12-23 months (extenuating circumstance)

Deed in Lieu:     Same as Short Sale

Chapter 7 Bankruptcy

Conventional: 4 years from completion or 2 years (extenuating circumstance)

FHA: 2 years from completion or 1-2 years (extenuating circumstance)

VA: 2 years from completion or 1-2 years (extenuating circumstance)

Chapter 13 Bankruptcy

Conventional: 2 years from completion or 4 years from dismissal(extenuating circumstance)

FHA:  Must be fully discharged or 1 year payout elapsed (extenuating circumstance)

VA: same as FHA 

You may be able to get lending sooner due to Extenuating Circumstances.  An extenuating circumstance would allow a shorter recovery period and are evaluated on a case by case basis.  For questions, CLICK HERE

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