Foreclosure versus short sale

Choose Your Way: Foreclosure Or Short Sale

Are you confused whether to go for a short sale or foreclosure? Let us have a brief insight on each of these. Keep on reading to clear all your doubts.

Short sale:

A short sale is the selling of a property in which the income or profits from selling the estate will be less than the balance secured by the lender and the property owner is not able to pay the lender the full amount, The lender agrees to liberate the borrower on the property and agrees to take less than the actual price payable on the debt. Any unpaid balance remaining to the creditors is called a deficiency.

To meet the criteria for a short sale you require:

·         The house must be equal to or less than the amount of your debt.

·         It is important to give evidence that you are in financial trouble, for example, jobless, decrease in income, any medical condition and it’s expenses, even conditions like divorce, property trouble, etc.

Short sale agreements do not always release the debtor from their responsibility to pay back any shortfall after the sale, unless particularly settled between the two parties.

Foreclosure:

Foreclosure is a particular legal process in which a person who lends money tries to get back the balance of the loan from a borrower who has not made regular payments for some time now. To the lender, this results in the sale of the property utilized as the security for the loan. This right is obtained by court order or by particular statutory procedure.

Foreclosure Liabilities:

There is a huge difference between foreclosure and short sale. It you choose foreclosure, you give away your house or property and get out of any money trouble. Even though you free of the debt, you can still be liable to the IRS for taxes. In short, if your asset or property goes into foreclosure then you are accountable for the discrepancy of what is payable on the estate versus what is sold in the auction, or the deficiency balance. You must understand that this is specific to the State and in almost all States you will be accountable for the shortfall, but in few States the bank may not always be able to follow the debt. Therefore, before entering the foreclosure process you must clarify your State’s laws.

There are many other options you can turn to before you decide to venture into foreclosure. You have an option of short sale, loan adjustment, etc. Generally, a short sale is a very good choice, but not always. It depends on many other factors pertaining to the borrower. So now there are many options you can opt for before going into foreclosure.

Bank Involvement:

Generally people feel that banks will not easily help in a short sale. But on contrary, banks are also interested in a short sale over foreclosure. The reason being, foreclosure requires more time and banks have to expend more money. Banks are full with foreclosures and therefore, they opt for short sale. It is better than increasing the foreclosure lists. You can easily qualify for short sale, the only thing you need to do is to give  good evidence of your financial trouble, and also give an evidence of the worth of your house. Now, even the government participates in short sales and there is incentive for the short sales.

More recently, short sales have increased in range from 10% to 50%. In the recent year, there has been more increases seen in short sales rather than foreclosure. Due to inflation, recession, and other financial changes in the market, more people are going into short sale which is feasible for the consumer and banks.

© Global Realty & Investment Corp 

Buying versus renting: pros and cons

Definitely, it would be nice if you need not write a rent check each month. Nothing can make you feel safer than owning a house, provided that buying a home will not result in financial problems of its own. Every year, a new wave of first time home buyers hits the trail in search of their humble abode. There are pros and cons to home buying. Certainly, there is the matter of timing and related financing programs.


Let us discuss the key monetary costs associated with home buying to stack up against your monthly rent check. Here are points to consider when deciding on buying versus renting.

·         Owning a home means gaining equity. If the owner keeps the house long enough for it to rise above the initial cost of its purchase, then that is profit. This is one of the most essential and superb matters associated with home ownership.

·         When you buy a home it brings sense of accomplishment and pride. It is also a chance to express your style and personal taste. You can enjoy freedom with home ownership.

·         Buying a home also lets you have insight as a part of a permanent community. On the other hand, in a rented apartment or home, one might feel temporary and less involved.

Now, let us discuss financial considerations on buying versus renting.

·         When buying a home, with your every monthly payment, you are putting money into savings. On the contrary, when you rent a home you have to give money to the landlord it is an expense. Every time you pay a mortgage, a percentage goes toward your equity. Indeed, this is similar to having money in your bank account, which you can draw upon later when needed. Every year, rental rates increase and the principle on your mortgage is decreasing with every payment. Further, the housing market continues to grow and hence the valuations of homes.

·         Owning a home also comes with some interesting tax benefits. Each interest payment made is accounted in your tax deduction later. The same is not true with your rental payment.

With all the above points, buying a home certainly sounds great! However, it is not for everyone. Every coin has 2 sides and we have to think about every aspect before getting into home ownership. Of course, we don’t want it to be our nightmare.  When it comes to buying a home, it is a complicated, time-consuming and of course, costly endeavor.  Let us think about the responsibilities involved in buying vs. renting.

·         Buying a home requires an investment of time. As a tenant, you can enjoy more freedom to move about the country. As a home owner, you have to think about and manage the leaking pipes, pruning hedges, mowing lawns, and lots more to keep all things running smoothly.

·         When it comes to buying a home, many small home improvements can keep adding up  as expenses. Sometimes, you might need to pay for utilities that would be covered in a rental agreement.

·         When you rent a home and find that you are not happy with the locality or your new neighborhood, then you can find a place somewhere else. You can take a decision to shift somewhere else instantly depending upon your rental agreement. Imagine a similar case with home buying. You cannot sell out your home instantly. You have to wait till you get a good deal for your home, along with the expenses invested in it.

Weighing the advantages and disadvantages of buying and renting a home can be challenging. Definitely, the above considerations may vary from person to person. You have to think about your financial condition and think about the effects of the decision you make in the future. Do not forget to take responsibilities into account while counting benefits of any aspect. This will definitely help you make a smart decision that will give you the best return on your investment.

© Global Realty & Investment Corp 

Benefits and risks of pre-foreclosure property

Do you want to buy a house at cheaper rate? Many people look for different ways to buy a property below its market value. That is why; foreclosure properties are in great demand nowadays. Do you know about pre-foreclosure properties and benefits associated with investing in such properties? Definitely, it is beneficial to buy a pre-foreclosure property but some risks are also associated with pre-foreclosure properties.  

A pre-foreclosure property has a loan, and the landlord is in impending danger of losing his property due to foreclosure. The property has been listed as delinquent and soon the lender will take the custody. A buyer may be able to get a pre-foreclosure for 40% less than the current market value of a home, and the deal would close faster than would a foreclosure. Understand that the owner can stop the foreclosure process by selling the property or paying off due amount. Here are some tips for you

1) Find properties- Find distressed homeowners. You can use ads, mails and market yourself through networking. In local newspapers, you can find foreclosure notices. You can even subscribe to online listing services.

Once you find a property, it is time to know more about its neighborhood and condition. You can meet the owner or ask neighbors. Be careful as the owners are still living in the home.

Make sure that the property is still in default- you have to confirm that the property is in default and a homeowner has not resolved the situation. You can contact the person, party or trustee who is doing the paperwork to start and complete foreclosure proceedings on a property.

Find the potential bargain. Collect following details:

• History of ownership
• Estimated market value
• Outstanding loan balance
• Loans and other property liens the owner may have taken out
• Your monthly expenses including taxes, repairs, insurance, mortgage payment, etc. as a homeowner

Think about all the costs as a buyer including repair costs, extra liens, loan balance, etc. from the estimated market value of the property. The calculations will be a basis for your bargains with the owner. You can easily get all these details through country recorder as this is all public information. If necessary, use online services or consult a local real estate agent.

4) Contact the owner- With all above information ready, it is now time to approach the owner.  

• You should let the homeowner know of your interest in the property. So, send a letter.
• Search for the contact details of the homeowner.
• Direct communication is always better. Try to schedule a meeting so that you can discuss a possible sale. This is also an opportunity to have a look at the property.
• Make sure that the property meets your criteria.
• Depending on the owner, you may have to buy the property "as is."
• Note down the estimated repair costs and consider them while quoting your purchase offer.

When all goes well and both of you agree to proceed, you should negotiate the terms of a purchase. As a buyer, you should aim at buying a property at least 20% below market value. While determining the final purchase offer, consider the rate of real estate appreciation in the locality along with the potential for increasing the value of the house by making improvements and repairs.

Close the deal- Put the agreement in writing. It is better to consult a local real estate attorney or agent.  The purchase agreement should make final deal reliant on a professional inspection of the property and a complete title search accomplished by an attorney or title company.

Keep in mind that a property in pre-foreclosure status is not essentially for sale. Sometimes, the property owner may look for other options to resolve the default. Nevertheless, a pre-qualified cash buyer with his offer is supposed to be the best possible decision to resolve the default.

© Global Realty & Investment Corp 

Tax rules you should know if you rent out your vacation home

Do you own a vacation home? Are you planning to rent it out and make some money? If yes, then wait. Do you know about the tax rules for renting out a vacation home?

Many vacation home owners select to rent out the properties in order to generate more income or to balance the investments and expenses of home ownership. The homeowner may be entitled to certain tax benefits on the basis of the period a property is rented out. This definitely helps a homeowner to make his ownership more affordable. Understanding the tax rules before renting out your home, will help you avoid any tax surprises while enjoying the advantage of tax breaks.

Do you know that adjusting your personal use of a vacation home can be beneficial for you? Yes, it will be categorized in a more advantageous way for tax purposes. Well, it is a good idea to invest in a vacation home and get returns in the form of rent and tax benefits. However, there are some rules that you need to understand before renting out your vacation home. Let us discuss these rules to ease your tasks.

• If you are planning to rent out a portion or entire vacation home for less than fifteen days, then it is not essential to report the income. However, expenses associated with the rental would not be deductible then.
• For renting out a vacation home for more than 15 days, it is necessary to report the income. In this case, you may be entitled to deduct all or some of your rental expenses including depreciation, repairs, insurance and utilities. Exact deductible depends upon categorization of a rental property for tax purposes.
• If it is a rental property, then you can deduct rental expenses like losses according to the rules of real estate activity. One cannot deduct any interest, which is attributed to your personal usage of the home; however, the personal portion of property tax can be taken as an itemized deduction.
• In case of a non-rental property, rental expenses can be deducted only to the extent of rental income. Any excess is carried forward to offset rental earnings in coming years. An itemized deduction can be considered for the personal portion of both property taxes and mortgage interest.

·         To maximize deductions, keep the annual personal use of your vacation home for less than 15 days or 10percent of the total rental days. Here, you can treat the vacation home as a rental. This means that you get the same generous deductions. You can avoid exceeding the 10percent limit by not using your vacation home more than 1 day for each 10 days you rent it.

·         Use your vacation home personally for over 14 days in this case; however, your deductions may be limited. In case, your rental income is lower than your rental expenses, then the loss cannot be counted to offset other sources of income.

A vacation home definitely offers a break from the daily drudge. In addition to this, you can enjoy a break from taxes. The majority of home owners decrease the taxable income with tax deductions for vacation homes. As discussed above, the deductible depends upon numerous factors, particularly if it is rented out and how often you visit it.
In today’s era, a vacation home cannot be limited to a mountain cabin or a beach cottage. Even boats and RVs can count, provided that they feature all essential facilities for bathroom, sleeping and cooking. Tax deduction for vacation homes is a slightly tricky concept and it is better to consult an expert tax adviser.
Many people buy a vacation home just for an investment. If you have bought your vacation home exclusively for personal enjoyment, then generally, you can deduct your real estate taxes and mortgage interest, like your primary residence.

If you are planning to rent out vacation homes, then it is a wise decision as you can take advantage of certain tax benefits. This will make a second home more affordable. The tax laws offer various advantages depending on the period for which the property is rented out every year and the amount of time the owner uses the home. As tax laws are complex, it may be helpful to consult with a knowledgeable tax specialist. You will surely have a comprehensive understanding of the tax laws. Get ready to determine the best approach to renting out your vacation home now.

© Global Realty & Investment Corp