Home Buying in San Diego>Question Details

Allen, Home Buyer in San Diego, CA

Im in san diego california I am currently in escrow to buy a house. It is a short sale so inspections have been done and the loan process has gone

Asked by Allen, San Diego, CA Mon Nov 21, 2011

on. The problem is that the lender requires a tax transcript for the past two years. For the tax year 2010 we asked for an extention and filed late. That return was sent back to us by the post office because the label had gotten wet and they couldnt read the address. Anyway, I sent it back and the IRS
should have the return on 11/19/2011. It takes the IRS approximately 4-6 weeks to issue a transcript. The tentative closing date for the deal is Dec. 5. Since this is a short sale I don't know if the selling bank will issue an extension until we get the transcript. That being the case, if they foreclose on the house do we lose our earnest money deposit? I need counsel
on how to proceed from here. I am assuming that the sellling bank will not do an extension (I hope that they do). I want the deal to go through and if you have any input on how to do that I am all ears. Assuming the worst case what are my options

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Hello, I am the original poster of this question. First, the IRS was able to get the tax transcripts done in time for the new closing date. The selling bank gave a two week extension and IRS was able to finish within that time frame. So, house closed on Dec 21. thank you everyone for your help, support and advice. In return I would like to post for people my experience as a way of giving agents a heads up for clients in this situation.

Some lenders will only take a tax transcript from the IRS, they will not take anything else. ie: signed copies of tax returns as proof of filing, even if stamped by the IRS or given by your accountant. They will only take a transcript that they themselves pull from the IRS.
So, if you have a deal pending make sure that your clients payed the previous two years taxes otherwise you will find yoursel with a closing date looming needing only a tax transcript to complete the deal.
there is no way to expedite the process. Once the IRS recieves the tax return it takes them 4-6 weeks if filed by mail to have the transcript available or 2-4 weeks if filed electronically. obviously it would behoove you to have your client file electronically but the electronic filing service is not available from about october 20 to sometime in january. This applies to everybody, accountants included.
A word on the time it takes the IRS to make the transcrip available. From the time they cashed our payment check in November to the time they allowed the transcript to be pulled was about 3 weeks. This is well below the quoted 4-6 week timeframe an operator quoted me for mail in transcripts. So, basically times will vary depending on how busy the IRS is.

In sum; make sure your clients did pay for the previous two years taxes otherwise you may find yourself in the same situation. Again, there is no way to expedite the process, no special department of phone number. There is a special taxpayer advocate where you can try to get help and it may certainly be an option but its best to know that your client already paid prior to getting into a situation where you have to pull everything through at the last minute. Anyway, thanks to everyone who responded and gave support advice or insite.
Merry Christmans
0 votes Thank Flag Link Fri Dec 23, 2011
First realize that this is not your fault or your lender's fault. Though when you tell the seller, they will act like it is, still let them know sooner not later.

I had the exact same problem, the tax transcripts showed up yesterday and the loan is funded and recorded, so it most likely will not be a problem, depending on when you need it to close.

That said, the seller can file chapter 13 and stop that foreclosure. This would not be the best way to do it. If I were your reator or if i were the lender on this one, I would be calling the lender that is doing the foreclosure, I would explain to them the situation and get them to stall the foreclosure. I have done this several times over the years. Do not be hard on your agent or loan officer if they did not know to do this, most would not.
Good luck
0 votes Thank Flag Link Thu Dec 1, 2011
If all fails and you did not release your finance contingency your earnest money deposit will be refunded.

Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Wed Nov 23, 2011

There are tax services that will get the information to the bank. Your lender should know about this.

Robert Wolf
0 votes Thank Flag Link Tue Nov 22, 2011
Hi Allem,
If you are currently being represented by a broker, we cannot give you any real estate advice. It's a RESPA violation. Please talk to your broker/agent about the matter. He or she will find you help. The agents who responded below are answering your questions assuming you are not represented. Kudos to them.

Best Wishes.
Jessica Nguyen
Keller Williams Realty
12265 El Camino Real #180
San Diego, CA 92130
858 720-1900
0 votes Thank Flag Link Mon Nov 21, 2011
The tax transcripts are to verify that your income (w2/1099) match what is on your tax returns. I would talk with your lender/mortgage broker and see if they will accept a letter of explanation in lieu of your transcripts People file extensions all of the time and lenders usually have a contingency plan when this occurs. It may be more difficult if you are self employed vs. Wage earner but your lender should be able to figure out a work around.

As long as you haven't removed your loan contingency by signing the contingency removal form you should be ok with your deposit. Good luck.

Scott McPherson
So-Cal Rebate Realty
C2 Financial Corp
Real Estate and Loan Professional
P: 619.609.7006
F: 619 489 0034
0 votes Thank Flag Link Mon Nov 21, 2011
Hi Allen,

I had the EXACT situation happen with one of my buyers. He filed the return with the IRS the last week of October with the sale scheduled to close on 11/4. We were able to get the short sale lender (Wells Fargo) to grant an extension till 1/6/12. In the mean time, the sellers asked my client to rent the property until the close of escrow, as he was scheduled to move in that weekend. As of today, my client's return with the IRS has been processed, and is now reflected as so when his lender verifies income with the 4506T, which was roughly 4 weeks from when it was filed with the IRS. The IRS had given us the timetable of 6-8 weeks, and since it is off peak season for them it seems to have happened much quicker than that. Now I'm not saying this is what will happen for you, as each case is unique, but I wanted to give you some hope that it may. If this is the first extension requested on this short sale, I expect it to be granted. However, it always varies depending on which lender and how that negotiator is feeling when they receive the request. As long as the listing agent conveys to the short sale negotiator that all parties are committed to completing the sale, I would imagine they would accept your extension. I hope this helps and sheds some light on the situation.


Ken Schwartz
DRE# 01854235
KM Realty, Inc
3530 Camino del Rio North #101
San Diego CA 92108
Cell: 858.366.3093
Fax: 888.470.5928
0 votes Thank Flag Link Mon Nov 21, 2011
Paul's right, definitely ask for an extension, but as far as requesting a release of your deposit if the sale falls through, the seller doesn't have to honor it. That would be a worst cast scenario. Did you contact the IRS and try to get the transcript released? Maybe if you explain your situation, they may help you, or maybe they can send you something in lieu of the actual transcript that will satisfy the lender, something outlining the information the lender needs. And see if you can talk directly to your underwriter to see if there's something else you can do. Neither may help, but it can never hurt to ask.

Good luck!

0 votes Thank Flag Link Mon Nov 21, 2011
Your Agent can request the extension; if the extension is denied and the property goes to foreclosure you can request the seller to release your deposit. This is a popular scenario and can be easily settled.

Best Regards,

0 votes Thank Flag Link Mon Nov 21, 2011
Hi Allen -
I am assuming you have an agent? What does he or she say about the situation? The next question is if you are in escrow, have you removed all of your contingencies? I am assuming if your lender is requiring this information, then they have not given you full approval and you may have not removed contingencies. If that is the case, you should be able to cancel escrow and request your deposit be returned. If you have removed contingencies, then you may want to start looking into the status of the deposit with your agent and the listing agent. Just because you are cancelling does not mean you should lose your entire deposit. Best suggestion I have is to ask your agent all the pertinent questions about each worse case scenario and see how to handle it.
Good luck

Jeff Smith | Realtor® | Your Best Choice!
HÔM Sotheby’s International Realty
16909 Avenida De Acacias | Rancho Santa Fe | CA | 92067
858.367.4333 direct | 858.756.1150 office | 858.756.1171 fax
DRE #01056750
0 votes Thank Flag Link Mon Nov 21, 2011
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