Home Selling in 95138>Question Details

Kluless97, Home Seller in 95138

What is the best option for getting rid of our home before three years is out on first time buyer tax credit? Can you rollover loss to next mortgage?

Asked by Kluless97, 95138 Fri Nov 18, 2011

My husband and I bought a condo in San Jose for $313k at the end of 2009. Houses with the same floor plan sold for $500-600k in 2005-2006 so we thought we were getting a great deal. We did an FHA loan and took the $8,000 tax credit, which we in turn put into the condo for updates. We intended to stay in the condo for five or more years. This particular area has been hit HARD with short sales and foreclosures since we moved in. Due to this, prices have dropped dramatically. I have watched home sales - same floor plan as ours - very closely. One regular sale went for $280K nuy short sales have been going anywhere from $229-$260. We recently found out that my husband may be transfering to Dallas in about 6 months. What are our options? We want to buy a home in Texas so don't want to hurt our credit rating with a short sale. We don't have $35-45k to cover the loss of the home. Our mortgage is about $2500 and we estimate getting $1900 for rent. Also don't want to pay $8,000 tax credit back.

Help the community by answering this question:


Hi Kluless97

One option is Rent to Own.

While you are strongly encouraged to talk to a Tax Advisor, here is some guidance to your
questions above.

Clearly, you cannot take a loss on your Principal Residence and carry it forward. One eats
the loss on a Personal Residence with No Carry Forward of the Losses.

However you can on a Rental property as it is deemed as an Investment Loss. However,
if the Tax rules change in the future then you may not beable to.

Since, you do not want to pay the $8K tax Credit nor ruin your Credit your best bet
is to rent it out and write off the structure. Clearly, iff you exercise a Short Sale or
Foreclosure, your credit does take a hit for 3-7 years

One option is Rent to Own, but the challenge is determining the price today on a
property that will be exercised to close 3-5 years out.

If however, the stock market crashes and the economy and GDP dives, then there is no guarantee
that you may even get $1900 in rents if the market liquifies. Also, if the Tax structure changes and we
go to a Flat Tax structure, the days of write offs will be done.

In the mean time do find out who is holding your loan, this is important.

Do get in touch to discuss further if you wish.

Best regards


Coldwell Banker
2 votes Thank Flag Link Wed Nov 23, 2011
My name is Dolores Robinson-Opia I am a Realtor I can only answer questions that focus on buying and selling your home. You really need to go to a Tax person to help you. My phone number is 408 849-5253
1 vote Thank Flag Link Sat Nov 19, 2011
If your income allows two mortgage payments, you might want to buy the home in Texas and rent out the condo. Speak to your tax consultant or CPA.
1 vote Thank Flag Link Sat Nov 19, 2011
If you can afford the negative cash flow, your best option is to rent out the property and hire a property manager to manage the property for you.

As CJ pointed out, the terms of your loan may prevent you from renting the property, however if the other choice for your lender is a short sale or a foreclosure you may be able to negotiate with your lender to modify the terms of your loan to permit you to rent out the property.

If you cannot afford to rent out your property, you will have to do a short sale, however that will harm your credit and prevent you from buying a house in Texas for at least a few years.

Given the costs to you of either renting the property or doing a short sale, you may want to reconsider whether transferring to Texas justifies the costs to you. Your husband may decide that given the costs to you, it is better to decline the transfer unless your husband's employer is willing to pick up some ar all of the financial costs to you. Some employers will pick up some or all of the costs involved.

Your husband might want to consider negotiating with his employer to have the employer pick up some or all of the costs involved with the transfer, or decline the transfer.

Thank you,
Charles Butterfield
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Email Address: charlesbutterfieldbkr@yahoo.com
1 vote Thank Flag Link Sat Nov 19, 2011
K -

Wow, not an easy question to answer here on Trulia. First, I would re-evaluate when your husband actually has the transfer in hand. If you updated your home with the tax credit, maybe the spring will bring you the chance to close the gap. If push comes to shove, I would consider renting it. If the cash flow is negative with rent, I would weigh out the potential hit for short sale vs cash flow and make a decision. If your husband transfer, and the house is underwater, you have a legitimate hardship for a short sale. If you rent and try to sell later, you may not have that solid of a hardship.

All ideas but it always best to discuss options with professionals in person. Little details could change the answer. Your loan may prevent renting.
1 vote Thank Flag Link Sat Nov 19, 2011
It is wise of you to ask and get as much data as possible in a situation like this, but we are NOT tax experts and as the other realtors have pointed out that is who you need to talk to so that ALL your options are laid out for you.
That is my advice to you, hopefully it will turn out better than you thought. :)
As always feel free to contact me if you need a good real estate attorney.
Good luck to you,
DRE# 01397256
1 vote Thank Flag Link Sat Nov 19, 2011
The answer to this will require more information than is provided in this forum. You have options and each have their draw backs. If you have an agent you trust and they are familiar the selling aspect you may want to contact them directly. If not, meet with an experienced broker who will go over all your options in person so that you can make an informed decision for you and your family.

This is too big a decision to decide on the internet.

All the best to you.
Web Reference: http://www.terrivellios.com
1 vote Thank Flag Link Fri Nov 18, 2011
Most answers to tax questions can be found on http://www.irs.gov

Good luck with your move.

Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Wed Nov 23, 2011
I highly recommend you seek advice with your CPA and a Mortgage Planner first and foremost. Home prices in Texas are pretty low in Texas and you maybe able to get approved and afford to buy a home in Texas without having to selling the San Jose home in Santa Teresa/Basking Ridge area I am assuming. If you can hold onto the San Jose property when you transfer to Texas and rent out for awhile longer much better! I have past clients, friends and family that have bought, sold their homes in California moved to another state and regretted selling and not having any properties in California. With that in mind, as I mentioned earlier, consult with your CPA and a reputable Mortgage Planner to walk you through the process and give you a sound advise based on your short and long term plans and factor in any unforseeable circumstances. And after you do that make sure to get connected with reputable Realtors in both areas to handle your home purchase and sale. I hope that helps and have a great thanksgiving.
0 votes Thank Flag Link Wed Nov 23, 2011

Because of the prce change in your home, prior answer could be your best bet. Put your home on the maket after you purchase your home in Dallas. If the home turns into a short sale, which it sounds like it will be, there wll be no. There is no cost for a realtor during a short sale, your credit isn't affected by the short sale whle you are purchasing a home because that is already done. The tax credit question , you will have to save for your CPA. I am currently working on a short sale that sounds similar to this as they have bought else where do to being moved for the job, and working towards letting go of the other home at a loss. If your home is priced right and you don't get to far behind in payments, there may be minimal damage to your credt.

Please call me if you would like to discuss your options.

Best regards,
Lllie Missbrenner
Better Homes and Garden Previosly Prudential Calfornia Realty
Cell: 925-628-9100
0 votes Thank Flag Link Tue Nov 22, 2011
Of course I will not use the Internet as my final decision in what to do with my home. But I am a worrier of some sorts and just wanted to see what my option are :-) I wanted to be as informed as possible before I discuss my options with my realtor. I guess I am asking if you were in a similar situation, what would you do? Thanks!
0 votes Thank Flag Link Fri Nov 18, 2011
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