On Monday July 21st the practice of using naked shorts will come to an end. What is a naked short and why do we in real estate care?
A naked short is a manuver in which a speculator shorts a stock and does not have the stock in place to cover the short. The speculator borrows the stock and then makes a contract to sell the stock at a lower price than it currently trades. The abuse has been geared around speculators that do not have a trade lined-up that would allow them to purchase the stock that they are now suppose to sell.
Today I had an interesting call, one that when you reflect on the call you ask yourself "Why!" The call was from a prospective customer wanting to know about an online class we offer about staging. The caller wants to know if the course is guaranteed to make him money?
I explain to him that our course comes with a money back guarantee that if his production did not increase by one additional transaction that RealtyU would refund his purchase price for the course. The agent was more concerned that the course would guarantee him more transactions.
There is much debate on the potential bailout that is being proposed by Congress, and as always there are many sides. The biggest problem stems from the extremes that are presented as examples ... the poor person that was obviously duped by an unethical mortgage broker who is no longer in the business and the well to do person that just bought too many toys and vacations with their "equity" and now needs a handout.
The problem that the government is going to face is "proof"
Proof that the person is really desperate and has exhausted all other means to keep their home; that would include stripping out dinners out, new cars, spa trips, vacations and other non-essential lifestyle choices
On June 11th the Wall Street Journal published an article titled "Some Buy a New Home to Bail on the Old", the article discusses the fact that some homeowners are buying a new home claiming that their existing home is being rented and then simply letting the first home go into Foreclosure. The article even states that some are being "coached" through the process by real estate agents and brokers.
Can you think of more unethical and fraudulent behavior?
Sometimes having been in this industry so long that I have become jaded to some of the fades that have come and gone, remember the recipe cards sent every month?
Staging is the latest in (I won't call it a fad) classes that I have to question. As an agent I always spoke with my clients, and taught my agents to do the same, about pre-packing and removing clutter and de-personalizing the property before selling. I have seen some really bad properties and always ask a very HARD question to the ...
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Let's just be frank and straight forward. For those of you that think Business Planning is a process of listing out your goals and showing them to your manager I will give you a one-word summation "BROKE" " which is probably what you will be if that is your plan. In a down market your business plan is the tool that you should be using to take corrective action and cut expenses where possible.
How? Simple, with your Business Plan and your dedicated use of your plan you should see which ...
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When looking at what our children or chilren'd children will be studying in future business classes the subprime meltdown will surely be on the top of the list. Think about the impact that this seemingly trivial error had on the entire economy. Homeowners were extended credit that they could not repay if interest rates rose ... that is the trivial part to many mortgage brokers 'You can afford it today ... let tomorrow take care of itself!'
So the seemingly trivial matter of extending credit to someone that may not be able to pay when interest rates changed causes some unexpected surprises. What were those surprises and how did those surprises effect the economy.
Tax Ramifications of a short sale ... prior to taking the Certified Short-Sale Professional course from RealtyU I was under the impression that you you would be given a 1099 for the amount that was forgiven by the lender.
YES and NO - If you are INSOLVENT (read previous blog) than you can use IRS code 108(a)(1)(b) also known as 1401 which states that a borrower who is INSOLVENT at the time of the taxable event is exempt.
Additionally, President Bush signed the Mortgage Debt Relief Act of 2007 last December which allows those that experience a short sale be exempt from the first $2 million dollars of debt forgiveness if married filing jointly.
Myth #1 - Your Total Liabilities must be more than your Total Debt - essentially bankrupt. WRONG ... A short-sale deals with cash-flow and the bank will make you prove that your INCOME is less than your EXPENSES. The bank is not checking to see how much savings you have or your 401(k) balance.
The term that the bank uses is INSOLVENT - as an accountant I can see how this would make one think assets and liabilities - a better term to use is ILLIQUID.
This is a play on words to some extent. The Fed has raised the Jumbo amount to over $700k in some areas. The Fed also believes that by raising the Jumbo loan limits that there will be much more refinancing over the next several months making late spring and into the summer a better economic picture.
The play on would is from the phrase "Trickle Down Economics" the theory that if those with means do not spend than those with no means do not work. How much will the ability of $700k plus loans being refinanced weigh on the economy ... here is some simple math.
