Sacramento Short Sale Sellers: Cancellation of Debt Forgiveness has been EXTENDED another year!

Well, ding dong, hallelujah, oh yeah, yahoo, and boom! Not only does it seem that the United States won't tumble over the "Fiscal Cliff", but federal lawmakers have extended some very important provisions for Sacramento homeowners through the end of 2013.

I'll start with what I think is the most important one first -- this affects short sale sellers.

A few weeks ago, I was quoted in a Sacramento Business Journal article about the the need for an extension of the Cancellation of Debt Forgiveness for short sales. The existing legislation was in place through January 1, 2013 (yesterday). This provision basically cancels the income tax on the "forgiven" debt in a short sale. So over-simplified -- if you owe $300,000 on your home, and short sale it for $200,000 - you have been "forgiven" $100,000 in debt. The IRS traditionally views this sort of forgiven debt as income, and as such the homeowner would have to pay income tax on this $100,000. Thankfully, the US House of Representatives and the Senate extended this another year until January 1, 2014. Short sale sellers -- you still need to speak to your trusted tax professional to make sure you are protected by this legislation. While it applies to most homeowners, it does not apply to everyone! For example, one of the provisions is that the property must be owner-occupied primary residence in order to qualify for cancellation of debt forgiveness. Again, talk to your CPA.

All in all though, this is a huge break for Sacramento short sale sellers. I have short sale listings that did not close in 2012...so those sellers were anxiously awaiting for this to be extended. I also have been speaking with many potential short sale sellers who were waiting to list their homes until they knew if the cancellation of debt forgiveness would be extended. If you have questions about listing your home as a short sale in the Sacramento area, I am happy to answer your questions and speak with you in more detail. Feel free to call (916-342-1372) or email me.

The other items that were extended via the "Fiscal Cliff" legislation -- mortgage insurance premiums are still tax deductible for taxpayers making under $110,000. This was retroactivated for 2012 and extended through 2013. Also, a 10% tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

So good things for 2012 and 2013...it's going to be a great year!

Quoted in a Sacramento Business Journal article about the possible extension of the Cancellation of Debt Forgiveness for short sales...

I was quoted in a Sacramento Business Journal article by Sanford Nax this week...the article was about the Sacramento real estate market, and specificially the subject matter of the part I was quoted for dealt with the "Cancellation of Debt Forgiveness" -- that expires at the end of 2012. You may know this as the rule that provides short sale sellers an exception from having to pay state and federal income tax on "debt forgiveness" (the difference between the mortgage amount owed vs the amount the property sells for) from a short sale. Right now there are wheels in motion to extend this beyond the end of 2012, but nothing has been solidified yet by our lawmakers. A few years ago in 2007, this provision was enacted and set to expire on December 31, 2009. It did expire, and then lawmakers acted, and it was extended through the end of 2012 a few months later in spring of 2010 -- but was retroactive to January 1, 2010.

I think lawmakers will end up extended this again, but it will happen the way it did last time -- it'll happen this spring and be retroactive to January 1, 2013. No guarantees obviously, but that is what I think will likely happen.

If the "Cancellation of Debt Forgiveness" provision were to permanently go away and weren't extended by the state and federal government, I think it will still make sense for many homeowners to do short sales. Unfortunately not all underwater homeowners will get good tax, legal, or real estate advice and won't realize the advantages of doing a short sale over letting the house go in foreclosure.

I always recommend that short sale sellers get tax advice from qualified professionals before doing a short sale. The current laws don't apply to all homeowners and all mortgage debt as it stands today. Often times homeowners are "financially insolvent" and would not be subject to the tax burden associated with the debt forgiveness anyway. Or with a CPA's assistance, homeowners can find ways to mitigate the tax consequences.

There are many other advantages to doing short sales vs allowing a house to be foreclosed. MANY short sale lenders now offer programs to compensate a homeowner to do a short sale -- up to as much as $45,000 under some circumstances, though more frequently I see $3,000 - $10,000 offered. Those incentives are not offered in a foreclosure. The credit consequences are far less devastating doing a short sale - the FICO score generally doesn't drop as much and rebounds faster. A person with a short sale on his/her credit will generally have a shorter waiting period to buy a home in the future with a short sale (0-4 years depending on credit score, downpayment, how far delinquent the payments were at the time the home was sold), vs a foreclosure (4-7 years depending on the credit score, downpayment). If the mortgage debt was refinanced, with a short sale there generally will not be any continuing liability for the forgiven debt, where after foreclosure the seller could still be liable for the remaining balance of the mortgage amount minus the value of the house at the time of foreclosure.

Sacramento Holiday Gift Giving Guide...are you giving back to our local economy and small businesses?

For the last few years in December, I have written blog posts about gift ideas from local Sacramento businesses to give to your favorite resident for Christmas, Channukah, or whatever else this holiday season. If your holiday festivities involve gift giving, there are many local Sacramento gifts you can give! Here are my top 12 gifts that will make any Sacramentan's holiday, at any age or budget:

• A 5k Run Training Program at Fleet Feet; the gift of fitness is a gift that keeps on giving! This super cool running store has a few locations in the Sacramento area (Downtown, Fair Oaks, Roseville, Davis) and offers several training programs for different levels (5k, half marathon, marathon, triathlon, etc). Their store locations offer a huge variety of fitness apparel too like shoes, synthetic socks, nutrition, etc. Estimated cost: $89+
• A membership to with the American River Parkway Foundation; another gift that keeps on giving! The parkway is one of the jewels of our Sacramento area, and the Foundation keeps it beautiful. A great cause! Estimated cost: $35/"Seed" annual membership.
• A new bike from Carmichael Cycles; they have everything from road bikes, mountain bikes, cruisers, and all the gear to make you a great rider! The staff is knowledgeable and they do on-site repairs too. Estimated cost: $500+.
• A subscription to Freeplay Magazine; it's the only Sacramento endurance sport magazine! They profile local athletes and give great fitness tips. Estimated cost: $3.50/month
• A California State University, Sacramento sweatshirt; My alma mater! Stay warm this winter while supporting our local CSUS Hornets! My CSUS sweatshirt was a Christmas gift from my mother during my freshman year...I still wear that thing even though it is totally faded and worn out...Estimated cost: $36 - $75.
• A new or used camera from Action Camera; This boutique camera store offers everything from new and refurbished camera, lenses, and more! They also do cool swap-meets for folks to sell their gear, photo contests, and "meet-up" events for photographers to take photos of neat stuff! Estimated cost: varies.
• Dinner at Mulvaney's; one of my favorite Midtown Sacramento restaurants! Neat setting, great ambiance, and amazing food. The menu is constantly evolving, so call ahead or check their website. Estimated cost per person: $50.
• A Growler of beer from Track 7 Brewing Co;  If you like craft brewed beer, and haven't discovered this place -- you need to go. Tucked away in an industrial warehouse space just south of Curtis Park at Sutterville Road and West Pacific Avenue, they brew their beer on-site...and have a tap room open to the public. They don't serve food, but there is almost always a mobile food truck in the parking lot. My personal favorite is the "Soulman Stout." Estimated cost per pint: $6.
• Massage from Elite Massage Therapy; Katie at Elite Massage Therapy in East Sacramento whips me back into shape after a long run, and she gives one heck of a theraputic massage too. Estimated cost/treatment: $75/ one hour.
• A copy of the book "NKOTB and Us", the authorized biography of the New Kids on the Block by Sacramento author Nikki Van Noy. Oh c'mon - someone you know was a New Kids on the Block fan in the 80's!? Estimated cost: $20.
• Tickets to a Sacramento Rivercats game; See the Oakland A's affiliate play at Raley Field. I'm a SF Giants fan, but I do really enjoy these games (especially when they play the SF Giant's affiliate team, the Fresno Grizzlies)...many of these players are a phone call away from the major leagues! Estimated cost/ticket: $6-30.
• A new home; Sure, I saved the best for last. Nothing says happy holidays like closing escrow on a Sacramento home...sorry if that was a little cheesy! Estimated cost: Priceless. =)

Check out my posts from previous years too -- there some great ideas there as well!
Post from 2011; Holiday Gift Ideas -- for your most beloved Sacramento Resident...
Post from 2010; Holiday Gift Ideas for your Favorite Sacramento Resident...
Post from 2009; Sacramento Holiday Gift Idea Guide
Post from 2008; Best Sacramento Christmas Gifts

New Facebook and Twitter usernames! Out with the old, and in with ErinNStumpf!

In a continued (and seemingly never-ending) effort to remove my former last name 'Attardi' from my life, I have finally gotten around to changing my Twitter and Facebook usernames to something more fitting. Can you believe there is another Erin Stumpf out there??? Since the username 'erinstumpf' was not available, I have incorporated my middle initial 'N' into my usernames...so you may now find me on Twitter at http://www.twitter.com/ErinNStumpf and on Facebook at http://www.facebook.com/ErinNStumpf. It's not case sensitive, but I felt for the sake of pointing it out -- there's an extra 'N'. Putting in the wrong username, sans N, will take you to another Erin Stumpf's site...I'm sure she's nice and all (and from Missouri!), but she is definitely not me. For people who are already following me on Twitter or are my friend on Facebook, there should be no change. I am now trying to find all of my online profiles that link to either page to change them...that may take years!!

What the F--- is wrong with this photo??

I took other agents in my Dunnigan Realtors Land Park office on a tour my new Tahoe Park listing today...we tour each other's listings as a group every week. I was taken aback by the sign out front! My name misspelled!!

If you follow me on Facebook or Twitter, or have been following my recent blog posts regarding my name change, you will know that I changed my name this summer after a several months-long process (from Erin Attardi, my former married name -- to Erin Stumpf, my maiden name that I reverted back to following my divorce a few years back).

Of course changing all of my marketing materials was part of the process, and my listing signs were changed out when the CA Department of Real Estate finally recognized the change and issued my Real Estate Broker license. This sign must have been made at 4:30pm on a Friday. Or perhaps they ran out of F's that day. Either way...it's been fixed.

New Listing - 5836 20th Avenue, Sacramento, CA 95817

Adorable 2 bedroom, 1 bathroom 1,168sf home near Tahoe Park! You will love the updated kitchen, large dining area, wood and laminate flooring, spacious bedrooms, large backyard (.16ac), covered patio, attached 2-car garage, and more. Don't wait! Offered at $159,900 subject to lender approval of short sale. For more photos and information, please visit 5836 20th Avenue, Sacramento, CA 95817.

Home Buyer Final Walk-through - do NOT skip this prior to closing escrow on your home...

I have blogged in the past about the process and importance of buyer home inspections on a property they are purchasing. Additionally I have blogged about a buyer's request for repairs on the property they are purchasing. I have also blogged about the purpose of doing a "final walk-through" on a house, just before the close of escrow. Today I would like to take a few extra minutes to explain the importance of doing a final walk-through to verify that repairs have been completed and that the house has been maintained by the seller in the same condition in which the buyer first viewed the home, the house was not damaged during the move-out, and no conditions were concealed by the seller's personal belongings.

Not to cause unnecessary alarm home for Sacramento home buyers -- because in the vast majority of transactions, the seller does all agreed upon repairs, and/or keeps the lawn mowed, keeps the house secure so its not vandalized, the house is not damaged at move-out, etc...however every now and then the final walk-through reveals a condition that needs to be corrected. Keep in mind -- a final walk-through is NOT a contingency of the sale. A buyer should not cancel the close of escrow if there is a repair that was missed or the house isn't clean. The buyer's agent needs to document whatever was not done, not maintained, or damaged and alert the listing agent immediately. The seller is contractually obligated to do any repairs that were agreed upon in writing, and the seller needs to maintain the home.

A couple weeks ago, a buyer client and I did a final walk-through for his soon-to-be new Pocket / Greenhaven home. We walked into the master bedroom, and next to a french door to the backyard was a severely deteriorated baseboard. This space had been concealed by a bookshelf. The baseboard (pictured above) was discolored and "spongy." This was a problem. And our closing was supposed to be 3 days later.

I alerted the other listing agent immediately. She had the pest inspector revisit the house the next day (we had already gotten a "Section 1" pest clearance), and it turns out there was substantial dryrot to the baseboard and the subfloor below the carpet. Cost of this additional repair was about $400 -- paid by the seller. Mission accomplished and escrow closed.

The moral of the story? These types of conditions really need to be discovered before the close of escrow. After the close -- the buyer has very little leverage on the seller. If the seller refused to cooperate after closing, the main remedy would be for the buyer to take the seller to small claims court...and then the buyer would have to prove that those conditions existed prior to closing escrow. Not fun!

So I am a Certified Distressed Property Expert (CDPE)...I'm sure you can sense my enthusiasm...

Well, for the last couple of days this week, I have been in a classroom earning my "Certified Distressed Property Expert" designation, aka the CDPE. Between my own listings and those that I have negotiated on behalf of other agents, I have closed somewhere near 75 short sale listings....So while I can't say I really learned anything new that I haven't experienced first hand in one of my transactions -- this is definitely a solid course that can provide agents with a basic understanding of some of the fundamentals of doing short sales. This class is no substitute for experience though...so if you are thinking about doing a short sale on your own property, be sure that you ask your agent for client references and find out just how much experience they have in addition to that fancy CDPE designation that cost $450 (plus the upgrade to become an "advanced member" of the CDPE family for only $149 down and $99/month).

Many short sale lenders (like Chase, Wells Fargo, Bank of America, GMAC, CitiMortgage, etc) are now referring their distressed borrowers/sellers only to agents who have this CDPE designation, so I finally pulled the trigger and took the classes. Candidly, I was a little annoyed that after all my experience and depth of knowledge in Sacramento short sales I was forced into taking this course in order to justify to banks that I am competent to do these transactions. So anyway, now I am a CDPE for a year, until I cough up much more money to extend it another year. Extortion if you ask me. But whatever. I guess I just bought some additional credibility. And it's a good tax deduction at the end of the year.