From: B
Sent: Tuesday, April 03, 2012 5:07 PM
To: G; A
Subject: Re: Short Sale Package - address
Importance: High
Hi G and A,
Several months ago I discussed a potential short sale with you of your home on **th Lane. I have been tracking your home and noticed that the foreclosure auction that was scheduled to take place at the end of February was cancelled quite some time ago. I am curious if you are still interested in pursuing the short sale option and, if so, would you like to discuss this option in further detail this week?
I look forward to your response,
B
From: G
Sent: Tuesday, April 03, 2012 8:00 PM
To: G; A
Subject: RE: Short Sale Package - address
I think we should do that. The sale was postponed to 3/27. On 3/26 the sale was canceled. The title company said the foreclosure process had to be restarted for some reason I didn’t understand. I will be moving next week. What needs to be done to start the process?
From: B
Sent: Wednesday, April 04, 2012 8:49 AM
To: G; A
Subject: Re: Short Sale Package - address
Hi G,
I am not sure why the sale was canceled, but the title company is correct. Once a sale is canceled it must be restarted which resets the 90 day clock. This is a unique opportunity for you to complete the short sale now.
In order to start the process we'd need the short sale package completed by both you and A. I will resend the package in a separate email. Do you think that you can complete the short sale paperwork and send it back to my team within the next few days?
Thanks, B
From: B
Sent: Wednesday, April 04, 2012 8:55 AM
To: A; G
Subject: Short Sale Package
Importance: High
Hi G and A,
Per my last email, please see the attached short sale paperwork. Attached are an Items Request List, Authorization Form, Financial Analysis Form, Short Sale Disclosure, Information Form, and 2 Example Hardship Letters. Please complete the documents and send them over to me via email or fax at 877.***-****. Once we have the SS paperwork it is at that time that my team will list the home for sale and begin its marketing.
Please let me know if you have any questions or concerns. If you'd like to discuss the process further please let me know and we can schedule a call whenever is most convenient for you.
I look forward to working with you!
B
From: A
Sent: Wednesday, April 04, 2012 9:17 AM
To: B
Cc: G
Subject: RE: Short Sale Package - address
B,
You talk about opportunity but I am not sure that this would be that. Frankly I am pissed the house didn’t foreclose. Here are my issues and questions:
The HOA hasn’t been paid. It has been racking up fees and legal fees. Yes, this debt was assigned to G in the divorce but companies don’t care and will hold both parties responsible. I filed for bankruptcy back in November. I am protected on all HOA charges up until then but anything after that I am held responsible. The longer the house takes to sell or foreclose the longer they will rack up these fees. It is my understanding that banks would rather short sell a house at this point. Which would take longer than the 90 days. Frankly I don’t want the house for the next 90 days but I am screwed with that aren’t I??
Another guess on my part but also from what I have read, if we sell the house we are responsible to pay back the First time home buyer credit of $8,000 that we received. That is regular sale or short sale. However, if the house forecloses we do not have to pay that back. I would rather not owe the government $8K.
I don’t think a short sale is beneficial at this time. The reason to do a short sale is to protect credit. We have 14 months of non-payment. We have other accounts that are hitting late on credit. I have a repo and a BK on my credit as well. Frankly I don’t think a foreclosure is that much more. My credit is shot anyway. I would rather the house foreclose, HOPEFULLY ASAP but I figure I am dreaming on that one. I just want this house out of my life and ALL financial ties to my ex gone.
A
Sent: Wednesday, April 04, 2012 10:52 AM
To: G
Subject: FW: Here is from the IRS website
Importance: High
FYI
A
From: Mom
Sent: Wednesday, April 04, 2012 9:49 AM
To: A
Subject: Here is from the IRS website
Importance: High
Sorry about the bad news in this email honey.. I went to the IRS site to make sure I got the best info. It doesn’t seem to matter if it is short sale or foreclosure (see the last two sentences).. the risk comes from George moving out and it no longer being either yours or his principal residence.
As I read it… if George moves out, he could put the tax credit at risk for collection. It states that if it is no longer your main home, the full amount of the tax credit is due in that calendar year that ‘You no longer live in the home for the greater number of nights in a year’. So if he moves out and gets a new main residence on April 7 (as an example) he will have lived in the house for 98 days… If the house does not foreclose or sell by approximately July 14, then you will both owe the $8000 tax payment back due to no longer having this house as your main house for a greater period this year. The moving out and not living in the house would be the repayment trigger instead of the foreclosure or short sale being the trigger for repayment. There is nothing about a capitol gain or anything if you are no longer using the residence as your main home.
If the house is short saled, or foreclosed, then that will become the trigger for repayment of the taxes. If the foreclosure or short sale of the house is the trigger for repayment, the taxes due are only based on the amount that the house sells for that is over the amount that is owed. So you are both protected from having to pay the taxes if George stays in the house because it will never be worth more than you owe on it (even after calculating the gain/loss basis as it states in the last sentence here).
Q. When must I pay back the credit for the home I purchased in 2009?
A. Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009 or early 2010. The obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
Q. If I claim the first-time homebuyer credit for a purchase in 2009 or early 2010 and stop using the property as my principal residence before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it?
A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year's tax return. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit.
Q. When does my home stop being my main home?
A. Here are examples of when your home stops being your main home:
You sell the home.
You transfer the home to a spouse or former spouse in a divorce settlement.
You convert the entire home to a rental or business property.
You converted the home to a vacation or second home.
You no longer live in the home for the greater number of nights in a year.
Your home is destroyed or condemned.
You lose your home in foreclosure.
You die. (1/6/11)
Q. When do I have to repay the credit?
A. You repay the full or part of the credit as an additional tax on your tax return when the home stops being your main home during the 36-month period following the date you purchased your home.
You must repay the full credit when:
You sold your main home to a related person or entity
Your home is destroyed, condemned or disposed of under threat of condemnation and you do not purchase or rebuild a replacement home within two years.
You converted the entire home to a rental or business property.
You converted the home to a vacation or second home.
You no longer live in the home for the greater number of nights in a year.
You may have to repay the full or a part of the credit when:
You sold your main home to a non-related person or entity. You repay the amount of the credit up to the amount of your capital gain. Note: when calculating gain or loss on your main home if you received the first-time homebuyer credit, you reduce your basis by the amount of the credit. See Publication 551, Basis of Assets, for more information.
You lost your home in a foreclosure.You must repay the credit only up to the amount of gain. (1/6/11)
From: G
Sent: Wednesday, April 04, 2012 12:40 PM
To: A
Subject: RE: Here is from the IRS website
Well I certainly don’t want to incur a huge tax liability for moving out. Regardless, the house stopped being your main residence in our divorce; you should look into that. It seems as if a short sale or foreclosure is the way to go because it limits our liability. This is year 3. “You no longer live in the home for the greater number of nights in a year.” The way I read it means you are not in the home for the greater number of nights of the year i.e. you must live in the house more than half the year, so it’s good that the house didn’t foreclose because we will have essentially had the house for 3 years. “Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009 or early 2010. The obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase”. The way I read that means we need to have the house as long as possible.
There are 3 ways to avoid the penalty:
In the house 36 months. We need clarification on whether on the greater number of nights for the 3rd year would count.
Foreclosure sale for less than $110-120k
Short sale for less than 110-120k.
I don’t care how we avoid it but we do need to avoid the tax credit penalty. What are your thoughts?
From: G
Sent: Wednesday, April 04, 2012 12:43 PM
To: A
Subject: RE: Here is from the IRS website
Here is the clause to short sale that keeps our liability low if it sells for less than $120k
You sold your main home to a non-related person or entity. You repay the amount of the credit up to the amount of your capital gain. Note: when calculating gain or loss on your main home if you received the first-time homebuyer credit, you reduce your basis by the amount of the credit. See Publication 551, Basis of Assets, for more information.
You lost your home in a foreclosure.You must repay the credit only up to the amount of gain. (1/6/11)
From: A
Sent: Wednesday, April 04, 2012 1:07 PM
To: G
Subject: RE: Here is from the IRS website
I don’t care how the house goes as long as it goes sooner rather than later. I want it done and over with. Especially with the HOA fees racking up.
A
From: G
Sent: Wednesday, April 04, 2012 1:42 PM
To: A
Subject: RE: Here is from the IRS website
The HOA stopped sending me stuff just like everyone else when you filed your bk. What will happen if I send Chase the keys?
From: A
Sent: Wednesday, April 04, 2012 1:44 PM
To: G
Subject: RE: Here is from the IRS website
You would have to call chase to find out. Call the main number and ask for the number to surrender the house. They have some special number for that. I didn’t keep it because I obviously can’t surrender the house and I wasn’t sure if you would.
From: B
Sent: Wednesday, April 04, 2012 8:52 PM
To: A
Cc: G
Subject: Re: Short Sale Package
Hi A,
I am very sorry for the delayed response. I have been all over the place today and wanted to make sure I had the time to thoroughly address your points/questions…
You are stuck with the home for AT LEAST the next 90 days. The big question, of course, is when will the bank reinitiate the foreclosure process? It could be as soon as tomorrow and it can be as late as they'd like it to be. As strange as it may sound, it is my opinion that the short sale will actually expedite the home's sale (and subsequent removal from your credit/name) as opposed to prolong the process. Homes are selling very quickly right now and I would expect a contract on your home in the first couple of days or weeks. The negotiation process should not take us longer than 45-60 days at most. And then the buyer will need to close in 3 to 4 weeks per the bank's instructions. Therefore, it is very feasible for us to have this short sale completed in 2-3 months. This will provide you with the finality you desire.
As far as the HOA goes, please know that the past due HOA balance survives foreclosure and there's a high likelihood that the HOA will attempt to recover the balance at some point. Depend on the size of the HOA balance, there is a very good chance that we can get this balance wrapped into the short sale and the costs covered by your lender. I cannot guarantee this but I am comfortable in sharing with you that we've had a great deal of success in getting banks to pay HOA balances as of late. I expect this trend to continue.
Yes, it sounds as though your credit is dinged. Foreclosure, with respect to the number of points it will hit your credit, will not make that substantial an impact in my opinion. But it will stay on your credit for a longer period of time than all other damage that you mentioned. That said, anytime you go to attain financing down the road (call it 4, 5, or 6 years from now) you will have to state that you have been through foreclosure. Though I believe your credit score will have rebounded by this time, there will still be an adverse affect on your interest rate, down payment, etc. as a result of the required reporting.
With respect to the tax credit repayment, it is my understanding that if you purchased post 2008 (and received the credit) then you do not have to repay the credit if the home was your principal residence for 3 years. I believe that you met this criteria but I am not sure. I will contact my tax attorney on this matter and get his quick opinion on it.
Hopefully this helps. Please let me know if there's anything else that you'd like for me to address.
Thanks, B
From: A
Date: Thu, 5 Apr 2012 10:46:33 -0400
To: B
Cc: G
Subject: RE: Short Sale Package -
Actually we won’t be at 3 years until December of this year. As George is looking at moving soon this could hurt us since it won’t be 3 years. He is looking into deed in lieu of foreclosure and just turning the keys over to be done with everything.
A
From: B
Sent: Thursday, April 05, 2012 9:15 AM
To: A
Cc: G
Subject: Re: Short Sale Package
2 thoughts – first, I am waiting to hear back from my tax attorney on the tax credit but I feel as though there must be a solution to this. I will get back to you on it ASAP. Next, do you have a 2nd loan on the property? If you do then a deed in lieu is not possible. But if you don't there is a chance that the bank would consider it. This may be a good option for you as it could be the quickest solution (though, for credit purposes, it is pretty much treated the same as foreclosure).
I will be back in touch ASAP.
B
From: B
Sent: Thursday, April 05, 2012 12:14 PM
To: A
Cc: G
Subject: Re: Short Sale Package
Hi A and G,
I just got off the line with my tax attorney and he advised that the tax credit must be repaid if a sale occurs prior to living in the home for 3 years…this includes foreclosure. There are a few extenuating circumstances like death, forced job relocation, and a couple of other situations that I do not believe apply to you. The attorney said that the IRS is very unforgiving when it comes to misreporting the credit repayment. I am not quite sure how this impacts your decision but wanted to share this info with you ASAP. If you'd like for me to connect you with my attorney please just let me know.
Thanks, B
From: C
Sent: Thursday, April 05, 2012 1:07 PM
To: A
Subject: RE: Here is from the IRS website
I still think you are fine. He is forgetting to say that – per the IRS, you are only liable up to the amount that the house sells for that is considered a gain. You will not have a gain on the house.
You may have to repay the full or a part of the credit when:
You sold your main home to a non-related person or entity. You repay the amount of the credit up to the amount of your capital gain. Note: when calculating gain or loss on your main home if you received the first-time homebuyer credit, you reduce your basis by the amount of the credit. See Publication 551, Basis of Assets, for more information.
You lost your home in a foreclosure.You must repay the credit only up to the amount of gain. (1/6/11)
However.. if the IRS finds out that George moved out, then they can trigger the ‘recapture’ of the tax credit. The foreclosure won’t matter at that point since it was triggered by neither of you living there anymore.
From: B
Sent: Thursday, April 05, 2012 1:45 PM
To: A
Cc: G
Subject: Re: Short Sale Package
Yes, I also caught this. I am not quite what this means and/or if it is being taken out of context. On the instructions to form 5405 (the form used to report the credit repayment) it says the credit must be repaid if the home is sold. It then defines a sale as also including foreclosure but mentions nothing about a "gain". So I do not know what to believe…I have to defer to the tax attorney on this one!
B
From: C
Sent: Thursday, April 05, 2012 2:16 PM
To: A
Subject: RE: Short Sale Package
Part III of form 5405
Disposition or Change in Use of Main Home for Which the Credit Was Claimed
Enter the date you disposed of, or ceased using as your main home, the home for which you claimed the credit (MM/DD/YYYY) (see instructions)......................
And then a couple of the choices are:
I sold (including through foreclosure) the home to a person who is not related to me and had a gain on the sale (as figured in Part V below). Go to Part IV below.
I sold (including through foreclosure) the home to a person who is not related to me and did not have a gain on the sale (as figured in Part V below). No repayment of the credit is required. Stop here.
I don’t have a lot of trust in B and his tax attorney… it says it right on the form.
From: C
Sent: Thursday, April 05, 2012 2:28 PM
To: A
Subject: RE: Short Sale Package
Hmmm… I see this on the form… which maybe we should have filed with your taxes. I don’t know if it counts since you didn’t quit claim it but it only says that it is in the decree. So maybe.
I transferred the home to my spouse (or ex-spouse as part of my divorce settlement). The full name of my ex-spouse is ▶
The responsibility for repayment of the credit is transferred to your spouse or ex-spouse. Stop here.
http://www.irs.gov/pub/irs-pdf/f5405.pdfsee part III
line e
