Tuesday, November 24, 2009
Short Sale need to guard
Short Sale Sellers Need To Guard Against "Double Whammy" By Bank and I.R.S.
Short-sale sellers and their agents have plenty to think about, and it is understandable if they are annoyed by the reams of paperwork that may come their way. Nonetheless, it really is important not only to pay attention to what is in the paperwork but also to be sure to retain it for possible future use. This is because of bad consequences that the seller may experience sometime after the sale has taken place.
Bad enough that a short sale involves the loss of one’s home with no equity to show for it, and a credit negative that may last for years; it also has the potential to produce two very bad after-effects. One is that the lender, or the lender’s assignee, may continue to pursue the beleaguered seller for the remainder of the debt. The other is that the I.R.S. may come knocking on the seller’s door, seeking tax on the amount of debt that was unpaid.
The first possibility is often contained in the paperwork that goes along with the seller’s ok of the short sale. The borrower may be required to sign a promissory note for the difference between the debt owed and the short sale proceeds received by the lender. Or, a lender may require the borrower to sign a paper acknowledging that the lender reserves its right to pursue the borrower for this amount.
The second possibility resides in the fact that, if a debt is forgiven, the borrower may be taxed on the amount he didn’t have to pay back. (see I.R.S. publication 4681). To be sure, there may be short sales where the debt that is unpaid is not taxable. For those exemptions, see a tax accountant.
The point here is that the short-sale seller may suffer one of those unpleasant consequences; but he ought not to suffer both.
The point is raised because here is what can happen: In allowing the short sale, the bank requires the borrower to sign a note for the difference, or to acknowledge that the bank has the right to take action to collect that amount. Also, probably sometime later, the bank sends out a 1099-C, informing the I.R.S. that a certain amount of debt had been cancelled.
NO ONE who has dealt with a short sale would raise the question: “How could this happen? The two actions contradict each other!” That is because anyone who has been through the process knows that it is common for the right hand of the bank not to know what the left hand is doing. Indeed, it is not uncommon for the right hand not to know what the right hand is doing.
This is why it is important for the seller to be sure to keep his paperwork. If he signed a document to the effect that the bank was going to pursue its unpaid interest, he should hang on to that. Then, if he receives a 1099-C saying that the debt was forgiven (and, therefore, taxable), he will have support for the claim that the 1099-C is incorrect.
Conversely, suppose that there was no specific release of the debt and that the paperwork contained no reference to it. Then, if the seller receives a 1099-C, saying the debt was cancelled, he should keep that, just in case the bank, or its assignee, comes calling a year or so later, trying to collect the debt.
None of what has been said here should be construed as tax or legal advice. I am not certified to do that sort of thing. But I hope this little piece will encourage short-sale sellers to consult with their appropriate advisors about these matters.
Monday, November 2, 2009
Incorrect and Incomplete MLS Entries: Chance of Sale is Lost Forever!
Incorrect and Incomplete MLS Entries: Chance of Sale is Lost Forever!
Many in real estate delude themselves if a home has the right price it overcomes all objections and will sell if placed in the MLS. I disagree. My proof are the thousands of MLS listings that expire or withdrawn every day without ever selling. Since I specialized in expired listings for a long time I have found there is always a reason why homes do not sell. Contrary to what many believe in our business, it isn't always the price that prevents a sale.
Sometimes the listing languishes on in the MLS system for years and -- no sale, and the reason? The listing is totally flawed! Incorrect data, price, directions, wrong MLS areas, and missing data prevent anyone from finding the listing.
Sellers do not understand that other agents cannot notify them of the mistake. Since they are already listed with another licensed real estate agent, and to do bring the error to their attention would be considered a solicitation of that listing.
That is a violation of real estate license law. Seller's should personally review the MLS listing and check it for errors and completeness. They should question any missing data fields and check their address and city for typos and errors. Agents should request a dated and initialed copy along with corrections to be placed in their clients file when the errors have been corrected.
Placing a new listing in the MLS is just passive marketing if it's done with the belief the entry alone will sell the home. The new listings, many of which are short sales and foreclosures are entered with little or no accompanying data or photos. A shoddy listing entry that is void of detail only ensures the home will never sell or sell at a greatly depressed price. Agents or brokers that believe that details are not important and that MLS entry itself will sell the listing if priced right are dead wrong. Listing agents that act this way obviously do not understand marketing on any level. There more persons that are interested in a property, the higher the bid price will be. This is the day of the Internet and custom searches by consumers to find and preview homes and properties online. However, if they entered incorrectly, no one will ever find them. Personally I believe that our industry is pre-occupied with fear and not doing the job the way we used to. As an industry we're reeling from a bursting real estate bubble and we're obviously not policing our own to ensure sellers get their homes sold and buyers can find what they are looking for.
Homes these days are being entered so poorly into the MLS system that no one will ever find the listing. They simply cannot be found. It does not matter the shape of the home, the upgrades or the price. The listing is in limbo if entered incorrectly or with only sparse data! There should be a law against this called "Criminal stupidity!" Think about it. Sellers that are relying on the broker to sell the home…will never have a chance of anyone finding the listing. This is an inexcusable offense, and the MLS systems that allow listings with loads of errors, or omitted data to be placed into the system is in big trouble. It is conceivable that you could list the perfect home, and no one will ever find it.
The MLS coupled with IDX allows buyers across many portals to search for homes. They all rely on the original data entry to make this viral marketing work. An MLS should never allow fields such as schools, and MLS area should never be allowed to be entered blank, or incorrectly. We all know there is manipulation of fields – listing a home in another city or school district to warrant more exposure or a higher price. Misinformation - really borders on illegal, and fraudulent since it tends to deceive and manipulate unsuspecting buyers.
Ages of homes should be filled in. Many buyers will search for a home or property by zip codes or by schools, city or map. If the listing is entered without schools, or correct cities … what chance is there ever of finding it? Agents that do this should leave the business, be fined, or have their incomplete or erroneous listing pulled. Just because an agent has no interest in entering what they consider minor details - they cannot overlook the fact that their actions may ruin the life of a home owner or seller forever. They are depending on us to get the home sold! There is no bigger abuser of this right now than those listing short sales, foreclosures, and bank owned properties. The losses to the sellers are criminal!
Examples of MLS entries that should never be allowed:
Wrong addresses
Partial Addresses
Age of home should be filled in - as opposed to wild cards or "unknown!”
Wrong City
Wrong Zip Code
Wrong MLS area
Schools not listed
Acreage
Room dimensions where required
Wrong Schools listed
Wrong number of bedrooms / baths
Missing features
No photos
No Virtual tours
No descriptions / remarks
Wrong directions
Wrong features
Wrong photos
Wrong price
Wrong Map coordinates
Wrong Subdivisions
Misspelled Subdivisions
No Map Coordinates
Many in real estate delude themselves if a home has the right price it overcomes all objections and will sell if placed in the MLS. I disagree. My proof are the thousands of MLS listings that expire or withdrawn every day without ever selling. Since I specialized in expired listings for a long time I have found there is always a reason why homes do not sell. Contrary to what many believe in our business, it isn't always the price that prevents a sale.
Sometimes the listing languishes on in the MLS system for years and -- no sale, and the reason? The listing is totally flawed! Incorrect data, price, directions, wrong MLS areas, and missing data prevent anyone from finding the listing.
Sellers do not understand that other agents cannot notify them of the mistake. Since they are already listed with another licensed real estate agent, and to do bring the error to their attention would be considered a solicitation of that listing.
That is a violation of real estate license law. Seller's should personally review the MLS listing and check it for errors and completeness. They should question any missing data fields and check their address and city for typos and errors. Agents should request a dated and initialed copy along with corrections to be placed in their clients file when the errors have been corrected.
Placing a new listing in the MLS is just passive marketing if it's done with the belief the entry alone will sell the home. The new listings, many of which are short sales and foreclosures are entered with little or no accompanying data or photos. A shoddy listing entry that is void of detail only ensures the home will never sell or sell at a greatly depressed price. Agents or brokers that believe that details are not important and that MLS entry itself will sell the listing if priced right are dead wrong. Listing agents that act this way obviously do not understand marketing on any level. There more persons that are interested in a property, the higher the bid price will be. This is the day of the Internet and custom searches by consumers to find and preview homes and properties online. However, if they entered incorrectly, no one will ever find them. Personally I believe that our industry is pre-occupied with fear and not doing the job the way we used to. As an industry we're reeling from a bursting real estate bubble and we're obviously not policing our own to ensure sellers get their homes sold and buyers can find what they are looking for.
Homes these days are being entered so poorly into the MLS system that no one will ever find the listing. They simply cannot be found. It does not matter the shape of the home, the upgrades or the price. The listing is in limbo if entered incorrectly or with only sparse data! There should be a law against this called "Criminal stupidity!" Think about it. Sellers that are relying on the broker to sell the home…will never have a chance of anyone finding the listing. This is an inexcusable offense, and the MLS systems that allow listings with loads of errors, or omitted data to be placed into the system is in big trouble. It is conceivable that you could list the perfect home, and no one will ever find it.
The MLS coupled with IDX allows buyers across many portals to search for homes. They all rely on the original data entry to make this viral marketing work. An MLS should never allow fields such as schools, and MLS area should never be allowed to be entered blank, or incorrectly. We all know there is manipulation of fields – listing a home in another city or school district to warrant more exposure or a higher price. Misinformation - really borders on illegal, and fraudulent since it tends to deceive and manipulate unsuspecting buyers.
Ages of homes should be filled in. Many buyers will search for a home or property by zip codes or by schools, city or map. If the listing is entered without schools, or correct cities … what chance is there ever of finding it? Agents that do this should leave the business, be fined, or have their incomplete or erroneous listing pulled. Just because an agent has no interest in entering what they consider minor details - they cannot overlook the fact that their actions may ruin the life of a home owner or seller forever. They are depending on us to get the home sold! There is no bigger abuser of this right now than those listing short sales, foreclosures, and bank owned properties. The losses to the sellers are criminal!
Examples of MLS entries that should never be allowed:
Wrong addresses
Partial Addresses
Age of home should be filled in - as opposed to wild cards or "unknown!”
Wrong City
Wrong Zip Code
Wrong MLS area
Schools not listed
Acreage
Room dimensions where required
Wrong Schools listed
Wrong number of bedrooms / baths
Missing features
No photos
No Virtual tours
No descriptions / remarks
Wrong directions
Wrong features
Wrong photos
Wrong price
Wrong Map coordinates
Wrong Subdivisions
Misspelled Subdivisions
No Map Coordinates
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