No, I am not referring to the 146 shopping days left until Christmas. I am referring to the time left (152 days) in 2012 that short sale
sellers can still take advantage of some of the state and federal debt forgiveness tax laws
. Many short sale sellers
who occupy their home as a primary residence and meet other criteria will have little or no tax consequence from completing a short sale
in 2012. Many short sale sellers have benefited from legislation in
them that will expire December 31, 2012. The difference in closing a
short sale in
December 2012 and January 2013 could cost a distressed homeowner
several thousand dollars in taxes. I am not a CPA and refer my clients
to tax professionals to seek advice in this regard to make sure these
laws apply to their situation.
In a nutshell (and completely over-simplified), if a homeowner does a short sale
and owes $300,000, and the NET proceeds from the sale that a bank will accept in a short sale
equal $200,000, the seller of the property receives a 1099 from the
bank for $100,000 (the amount of the "forgiven" debt). You will get this
1099 regardless of when you close your short sale
BUT for short sales closed in 2012, many sellers will not have to pay
income tax on this "forgiven debt." If you close in 2013, if the current legislation
in place remains un-extended to a later expiration date, you could have
a very large tax bill to pay when you file your taxes the following
year. Again, speak to a CPA regarding how this affects your situation.
If you need a referral to one, contact me and I am happy to give you
Given the length of time that short sales
take, if you want to complete a short sale
in 2012 you need to start the process NOW.Â Think I'm exaggerating?
Assuming a seller doesn't have some odd circumstances, the lifespan of a
typical Sacramento short sale
looks something like this:
-Listing the property, preparing for showings, gathering financial and hardship info
to submit to short sale lender
: 7-14 days. My vast short sale
experience tells me that most folks can't (or won't want to) list the
house tomorrow and start showing it by this weekend. If your average seller
called an agent today, met with that agent tomorrow, then spent time gathering their financial info
and making the house presentable making arrangements for pets, extra
house keys, etc., the house would realistically hit the market within 2
-First on market day, showings, and seller accepted offer to submit to
lender: 7-10 days. Let's face it, if a property is priced correctly and
the seller is flexible with access to the house for showings, given the
current lack of homes on the market, this process should be relatively
-Lender receives all financial and hardship information
from the seller, purchase contract and supporting documentation,
assigns a negotiator and orders BPO valuation of the property: 7 - 14
days. Some short sale lenders
are faster than others. Most of the larger banks
, Wells Fargo
, etc) have pretty streamlined processes for getting the files assigned to folks and the initial BPO values established.
visits property and returns value analysis report to short sale lender:
7-14 days. For the sake of defining it, a BPO essentially an appraisal
ordered by the short sale lender
This is their method to best validate the buyer's offer received and
determine the fair market value of a property. The folks who do these
BPO's are unaffiliated 3rd parties who might have 20 other BPO's to do
at the same time. Once the assignment is received, it might take them a
few days to fit visiting the property into their schedule (longer if the
house is occupied and they must coordinate access to the house with
someone else), then visit the property, then complete the report and
submit back to the short sale lender
that ordered the BPO.
-BPO received by negotiator, analysis of file: 7 - 45 days. Yikes. This
can take a long time...the file could be re-assigned to a new negotiator
and it could go to the bottom of that person's stack.
-Submitted to investor or management for final approval: 3 - 30 days.
Again yikes. Depending on who actually controls the decision-making
process of the loan, this could be super fast, or painfully slow. Best
case scenario is that the loan is owned by the short sale lender
itself and it's just making a management decision if the short sale fits within its internal guidelines, OR, perhaps Fannie Mae
or Freddie Mac
must approve the short sale. Or perhaps the loan is owned by a Hedge
Fund, or a Retirement Fund. If it turns out that the Missouri State
Teacher's Retirement Fund owns the loan for example (not to pick on
them, if they even exist LOL), and Margie in Accounting is the ultimate
decision-maker, you might be in for a longer wait.
So then approval issued! Yay! Now what...well depending on the offer you received from your buyer
, you will be looking at 21-45 days to close your escrow
, barring no additional surprises with the buyer's loan or inspections, of course.
So on the fast end of the normal timeline spectrum from the day the house hits the market to the day the short sale
is approved -- you are looking at about a month if all the stars align, plus the time it takes for the buyer
to close escrow
. If you are this fortunate and have a very straight-forward short sale
and no surprises, congratulations you still have plenty of time to complete your short sale before the end of 2012.
On the longer side of the normal timeline spectrum from the day the
house hits the market to the day the short sale is approved -- you are
looking at 3-4 months, plus the time it takes for the buyer to close
escrow. This timeline is more realistic for most short sales
, AND it will push you to the very end of 2012. It'll be stressful, but you have time to get your short sale
So...if you need to do a short sale
and can benefit from the tax laws that will expire at the end of 2012 -
what are you waiting for? I welcome your call if you have questions I
can answer or to see if we are a fit to work together.