Real Estate Information Archive

Lending institutions frequently offer struggling mortgage holders the opportunity to sell their home at an amount lower than the outstanding mortgage balance and write off the loss. That gap amount is actually income for the homeowner, and as such, is taxable. That means that if a homeowner with a mortgage of $120,000 short sells the home for $100,000, he must show $20,000 on his income tax return as income. This liability extends beyond short sales to include loan modifications in which the lender agrees to reduce the principle to an amount closer to the home value. Even the homeowner who loses his home to foreclosure is subject to this enormous tax burden. In the case of a foreclosure in which the balance of the mortgage is $100,000, the owner in a 25 percent tax bracket would find himself owing an additional $25,000 in taxes.

In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act to exempt the reduced amount from tax liability. Congress extended the exemption twice in legislation over the next few years. Unfortunately, the exemption expired at the end of 2013, with over six million homes still underwater. In 2013, the exemption equated to $1.3 billion in total.

Lawmakers are arguing over three different bills calling for an extension of the tax exemption. All three do enjoy some bipartisan support. Unfortunately, there is no way of knowing what issues Congress will determine are the top priority as members debate the debt limits and government spending. The Making Home Affordable program, which offers relief to homeowners through short sales does not expire until December 31, 2015, however, the tax exemption is not a part of the program. When Congress allowed the government shutdown in October of 2013, members agreed to extend the debt limits until February 7, 2014. Extension of the Mortgage Forgiveness Debt Relief Act is a part of the new debate.

If the taxpayer can prove insolvency, meaning that he has more outstanding debt than assets, he may be able to avoid the burden of the additional tax related to the short sale or home loss. However, additional properties such as undeveloped land could easily negate that option. In short, the expiration of the Mortgage Forgiveness Debt Relief Act will not just affect the struggling homeowner; it could also have a serious impact on our struggling economy. Even a delayed decision will influence homeowners considering their options.

If you are considering buying a home this year, you have probably heard about some of the changes to mortgage regulations and changes in the marketplace. At this point, you may not be sure what to expect. Here is a general rundown of what you will likely see with respect to home buying, particularly in Oregon, in 2014:

• The number of available homes for sale is dwindling, meaning that the competition for particular homes may increase. Buyers may find it necessary to submit multiple offers before acceptance, especially in the Portland area.
• Interest rates are rising, and while they are still significantly lower than in the past, buyers may feel pressure to act before rate hikes take place. A one percent increase in interest equals an 11 percent decrease in the maximum amount of the loan.
• New mortgage regulations may make it more difficult to qualify for a mortgage loan. Regulations created to protect consumers mean they will be required to prove their ability to maintain mortgage payments. Their debt to income ratio cannot exceed 43 percent in most cases. Self-employed buyers will need to prove they meet this level with two years’ worth of tax returns proving sufficient income in the same business. This can be a challenge since they generally use as many deductions as possible to avoid tax liability.
• Lower FHA loan limits mean that buyers who need to finance properties costing more than $362,250 will be required to seek jumbo loans without FHA assistance and make a 20 percent down payment.
• As interest rates rise, the refinancing market dwindles, which may force lenders to loosen some of their lending standards, however, the new regulations will limit their ability to do this or offer some of the creative financing they have in the past. Lenders are now required to make reasonable determinations as to the ability of the buyer to repay the loan in order to be safe from legal challenges in cases of default.
• As the year progresses, regulations and economic change will probably result in a slowing for price increases.

Your partner in this process is your licensed real estate agent. It is his job to stay on top of all of these changes and help you navigate the process of buying a home.

Many people avoid buying a home during the winter, but there are a number of excellent reasons to start the process before spring. Cold weather means a buyer's market. What you miss in curb appeal you will find at a warm hearth. Here are some important considerations for smart house hunting:

• There are fewer people shopping for homes on the market. The bustle of the holidays and traveling at year-end mean that a lot of people put off the process. This means that when you find a home and submit an offer, it is less likely for the seller to receive a higher bid.
• While inventories may be a bit lower during the holiday season, sellers tend to be very motivated. Homeowners with children do not like to uproot them in the middle of the school year, so if they are selling mid-winter, it is likely due to a job transfer or other compelling reason. Some homes have been on the market for a while and the seller wants to move the sale along. Others want to close the deal for tax purposes. Still others want to complete the sale process so they can start the year without loose ends.
• Because the brokers and lenders have fewer clients, buyers can enjoy more attention and focus on their needs. Lenders sometimes waive fees during traditionally slow periods to encourage buyers to use their services.
• During winter, the systems that serve the house are in full operation. You can tell if the heater is functioning properly, the plumbing is free of leaks and the roof and gutters are doing their jobs. This can prevent a lot of unhappy surprises you might not have discovered until long after purchase. You can tell a lot about the insulation and general comfort of the home when the weather is cold.
• Few investors are searching for homes to flip during the winter months, so you there is less concern of one outbidding you on the home you want. The closer you get to spring, the more this becomes a concern.
• Movers sometimes lower their rates in winter since business is slow. Even small discounts can save you money.

No matter what the season, your real estate agent will be your mentor throughout the process. You can count on his expertise to answer your questions and help you find and purchase the house that will become your new home.

America has long been a very mobile nation, with many people living in more than one state during their lifetime. According to Money Magazine, the top destination in 2013 was Oregon. Based on an annual study conducted by United Van Lines, 61 percent of Oregon’s interstate moves were incoming. South Carolina came in at 60 percent, North Carolina at 58 percent and Nevada at 56 percent. These figures tie closely to the annual report from CNNMoney of the Best Places to Live. Sherwood, Oregon ranks number five. Portland State University conducted a study that indicated that Oregon experienced the largest migration growth in the last five years with an increase of 35,290 in 2013.

The most commonly cited reasons for moving to Oregon are business incentives, industrial growth and lower cost of living. Many young professionals are attracted to the lifestyle in Oregon, such as the beautiful natural surroundings, efficient public transportation systems and local arts and entertainment. Add the fact that housing costs are significantly lower than in California and you can easily understand the lure of the Pacific Northwest. A home in Portland cost roughly 40 percent less than a comparable home in Los Angeles, and almost two-thirds less than a home in San Francisco.

Another report from the national Bureau of Labor Statistics states that in 2013, Oregon posted a 2.4 percent increase in jobs. This is the third-highest growth in the country for last year.

If you are one of the many people who have migrated to Oregon from another state in the last few years, you may be ready to make the commitment to buy a home. Certainly, the availability of homes has decreased due to population growth, but it is still a viable marketplace. If you are ready to look, contact a licensed real estate agent to help you with the process.