Kirk M West's Blog

It was bound to happen.  I mean really.... our recent success rate was just too strong.  Out of over 150 successful short sale transactions that we have been involved with one of our valued clients recently received legal documents via certified mail.   You guessed it. A collection agency was attempting to collect the unpaid balance from their old 2nd mortgage. But fear not.... that same collection agency quickly "went away"!

I have found myself more frequently addressing this question or several questions about this topic.  So I felt I needed to share it with the public (and make it easier on myself in the long run by simply referring clients to my blog in the future)

1. Here is what to Expect when you get that speical pakcage or visitor at the door - a lawsuit is simply a claim by one party (the Plaintiff) against another (the Defendant), which is filed in a court, asking a Judge to Order the Defendant to do something. For example, the lender sues the debtor seeking a Judgment ordering the debtor to pay the remaining debt. In many cases, the Plaintiff will not be the actual lender who made the loan. Collection companies are buying loans from lenders for pennies on the dollar then suing the borrowers for the full amount. I have read that one company, Cohen & Slamowitz in New York, has actually automated the process and is filing 80,000 lawsuits a year! The lawsuit has two parts: the Summons and the Complaint. The Complaint states the facts as to why the Plaintiff claims they are entitled to a Judgment against the Defendant. The Summons is the Order for the Defendant to respond to the Complaint within a certain amount of time which varies from State to State. In California it is 30 days.

2. What do you do next - How to Respond - Plaintiffs hope that Defendants will ignore the Summons and fail to file a response, usually an Answer, within the allowed time. If so, the Plaintiff will quickly get a Default Judgment and can start pursuing the collection by attaching the Defendant's property and garnishing their wages. This is the worst possible result for a Defendant because it is giving up without a fight. Instead, upon being served with a Summons and Complaint, the debtor should get together with an Attorney and determine how best to respond. Often, the first response is attacking the Complaint through a legal process called a Demurrer. There are many grounds for this such as: (a) the Plaintiff doesn't own the loan and therefore has no right to file the lawsuit; (b) the lawsuit is barred by various laws of the State (in California we have several related "anti-deficiency" laws); and (c) the Complaint is defective. At the same time, the attorney will start the Discovery process of compelling the Plaintiff to produce copies of every document they are relying on in filing the lawsuit. While the Demurrer could actually make the lawsuit go away like in the case of our client, it generally won't. What it will do is force the Plaintiff to spend time and money responding which is the last thing they really want to do. So it starts the negotiation for Settlement.

3. Why Settle? - Settlement Negotiations - At the start of a lawsuit, the Plaintiff wants to collect everything and the Defendant wants to pay nothing. While both sides want to win at trial, only one side will. Settlement eliminates that risk and avoids the heavy financial and emotional costs of lengthy litigation, usually well over a year.  As local Attorney Steven Beede has stated, in Sacramento, CA where we are based, 98% of lawsuits will settle before trial. The hard part is reaching an agreement. Inevitably the Plaintiff will feel they got too little and the Defendant will feel they paid too much, but both will agree that the settlement is better than the alternative of continuing in litigation. There is no standard percentage that determines settlement. Rather, it is a complex evaluation of the Plaintiff's evidence, the Defendant's defenses and financial capacity, and the likely outcomes.

5. The Role of Bankruptcy - The Bankruptcy laws of the United States are designed to give an insolvent debtor a "fresh start" if there is no way they can pay their debts. While some attorneys would recommend filing Bankruptcy if faced with a lender lawsuit, this is not necessarily the best solution for everyone. For example: First, other than this bad debt, the defendant may have other assets they want to keep; Second, by responding to the lawsuit, the defendant may be able to settle the debt or avoid it entirely; Third, Bankruptcy will stay on the debtor's credit for 7-10 years; and Fourth, the defendant may not even qualify for Bankruptcy. So, while it is one solution, Bankruptcy is not always the best solution.

while I realized this weeks blog post may not make you feel all warm and fuzzy inside, it should at least give you a clearer ideas what how the overall process works.  Educating yourself can often releive a lot of that stress caused by ther unknown.  The information presented in this Article is not to be taken as legal advice.... because I ain't no lawyer. *chuckle*  But I would be happy to refer you to one that specializes in these types of cases. 

Every person's situation is different. If you have specific questions about your situation, about short sales, foreclosure, or any other issues you may be facing, feel free to contact us me at kirk@kirkmwest.com. I offer a completely confidential and FREE consultation to evaluate your liabilities and strategize a resolution. This can be done in person or by phone. If interested, please call us at 916-893-9666.

Wow!  We recieved over 250 emails after yesterday's Blog Post.  Thank you for all of the great questions.   Your emails have sparked today's comments.  The most widely asked question yesterday was, "What happens next?"  "Will my lender come after me?" 

One of the most critical and least known questions facing sellers, agents and lenders is whether the lender can really come after a borrower for a deficiency after a Short Sale. While the answers may vary according to the laws of your State, here in California the answer is a solid "maybe". Meanwhile, lenders will continue to seek to put deficiency recourse language in their Short Sale Consent Agreements and the borrowers and their agents will continue to seek the removal of that language like we do.  While the presence or absence of recourse language may be enough for the Courts, that remains unclear for the reasons set forth below. This lack of certainty causes many short sales to fail and, until this issue winds its way through the legal system, no-one can know for sure whether a lender has any rights to collect a deficiency . But there are good arguments for both sides.

A. BORROWER ARGUMENTS AGAINST RECOURSE:

1. Short Sale is an "Accord and Satisfaction" - The short sale is inherently an agreement for resolution of a dispute between the borrower and the lender as to how much must the borrower pay. In completing the short sale and receiving money they otherwise would not have received, they have arguable settled all claims. The "Accord" is the agreement; the "Satisfaction" is the money the lender received.

2. Seeking Deficiency Violates the "Single Action Rule" - California only allows a lender one shot at collecting a debt. Arguably, the negotiation of the short sale and the lender's acceptance of money from the Buyer is a collection action. If so, then the lender would be legally barred from filing a lawsuit against the borrower to collect anything else.

3. Seeking Deficiency Violates the "Anti-Waiver Rule" - California real estate law provides that, if there is a default, the lender must take the security first (foreclose on the property) before going after the borrower for anything else. There are only a few exceptions to this Rule which could allow a lender to "waive" the security and sue the buyer, ie: such as bringing hazardous waste onto the property; or destroying the property's value by stripping out the plumbing or electrical systems. These conditions do not exist in a short sale. Yet arguably what the lenders are doing is waiving the security to allow the short sale to be completed. If that is in fact a legal "waiver", then the lender may be legally barred from coming after the borrower for a deficiency.

4. No "Consideration" for waiving or modifying - Any contract or any modification requires that there be an equal trade of benefits and burdens. The borrower gets the benefit of the loans to buy the property but also gets the burden of having to repay what they received. The value of what is exchanged by each of the parties is called the "legal consideration". When only one side gets a benefit, there is what is called a "failure of consideration" and the contract may not be enforceable. Arguably, this same requirement exists in a short sale: the lender is getting money now and that's a benefit but what is the benefit to the borrower? They're losing their property: that's not a benefit; they're getting no money out of the deal: that's not a benefit; they're going to get taxed on any debt forgiveness: that's not a benefit; If the lender does have a right to pursue deficiency recourse against them, that's definately not a benefit. So, what benefit does the borrower get out of a short sale that would be sufficient consideration fore remaining liable for a deficiency? Not much, if anything at all. Arguably then, if the consideration is insufficient, then the lender's right to waive the security and pursue a deficiency should fail for lack of consideration.

5. Additional Arguments - Creative attorneys will find a fertile field of additional legal arguments to be raised in defending borrowers against lender deficiency claims. These can include a) the loan should never have been made; and b) the lenders caused the crash, why should they profit from it.

B. LENDER ARGUMENTS IN FAVOR OF RECOURSE:

1. It is a Modification not a Release - A short sale is in effect a modification of the terms of the loan. The lender has agreed to release their lien on the borrowers property so the property can be sold. The lender agrees to do this without getting paid in full. Arguably, the Short Sale agreement only modifies the terms referenced in the agreement. Unless the short sale agreement expressly waives recourse against the borrower for the unpaid balance, the lender may argue that they still possess the right to collect on the deficiency after the short sale is completed.

2. Unfair to penalize lender if Borrower is otherwise liable - In California, some loans are non-recourse such as a loan obtained to buy the home you live in. However, these "anti-deficiency" protections kick in when there is a foreclosure. These rules might not apply in a voluntary transfer such as a short sale. When there are no such protections, ie: non-purchase money or refinance or investor loan, the lender could have recourse against the borrower through the foreclosure method used. So, lenders would argue it is not fair to deny them the recourse that the borrower already agreed to in the loan.

Who's arguments prevail will be determined in the Courtrooms across our Country in the next few years to come. Initially rulings will be made by Judges in the local courts and they could vary greatly. In time, these inconsistent rulings will be challenged in the Courts of Appeal until a clear legal answer becomes apparent. Of course, Congress could pass a law and give us an answer now but I wouldn't hold my breath waiting for that to happen. Meanwhile Lenders will seek to put language in their Short Sale Consent Agreements requiring the borrower to agree to deficiency liability

If you have specific questions about your liability, short sales, foreclosure, or any other real estate or mortgage issues, feel free to contact me at kirk@kirkmwest.com. We offer a FREE consultation to evaluate your liabilities and strategize a resolution. This can be done in person or by phone. If interested, please call us at 916-893-9666.

Trying to reduce the rising number of foreclosures in the U.S., the Treasury Department introduced a new federal program that makes it easier to process a short sale for people unable to keep their homes.

Home Affordable Foreclosure Alternatives (HAFA) streamlines the process for doing a short sale or deed-in-lieu of foreclosure for distressed homeowners who do not qualify for a federal home loan modification through the Home Affordable Modification Program (HAMP) or have missed consecutive payments after a modification.

The HAFA program started April 5, 2010, and ends December 31, 2012. Federal rules require servicers participating in HAMP to implement HAFA. The new program also requires borrowers to be released fully from future liabilities related to their first mortgage, including cash contributions, promissory notes and deficiency judgments.

Participation in HAFA cannot save homeowners from losing their property, but it can eliminate the effects of a foreclosure on their credit. Financial incentives for program participation include a $1,000 servicing bonus for lenders and a $1,500 relocation bonus for displaced homeowners. Lenders of other subordinate liens (e.g., HELOCs) may be allowed to keep a limited portion of the proceeds (up to $3,000 each) of a short sale, with the first-lien lender’s approval.

HAFA is designed for homeowners who have applied to HAMP for assistance but have had no success with their loan modification program. To participate in HAFA, homeowners must still meet HAMP’s eligibility criteria: home is principal residence; first-lien mortgage is in delinquency or default is reasonably foreseeable; loan closed before January 1, 2009; unpaid balance is under $729,750; and the mortgage payment is over 31% of gross income.

Here is the issue..... much like HAMP the program is seems good at the outset.  However, now that we are just shy of 2 months into the program there are hiccups.  First, many lenders don't have staff to handle the short sales to begin with and have not adopted the program just yet.  Second, the program will be taking, on average, an additional 2 to 4 months longer than the already 6 month long short sale process.  This is because the HAFA program needs approval from the government run program.  Lastly, the "qualifying" has been the #1 issue for the HAMP modification program and I expect it to be the same here. 

Keep in mind, if you are planning on selling your home, call me first. There are so many things to consider before making that decision.  Did you know there are 3 other short sale programs as well? 

As you may have already heard California has initiated its own homebuyer tax credit. The start date for this credit is fast approaching.  But you better hurry; only a certain number of you may qualify in time. 

Here is how it works.  The credit is for 5% of the purchase price, with a maximum credit of $10,000. That’s a dollar-for-dollar reduction against income tax payments that would otherwise be due. Homebuyers must claim the tax credit in equal installments over three consecutive years, beginning with the year of purchase. Purchasers are required to live in the home as their primary residence for two years or forfeit the credit.

To be eligible, first-time homebuyers can purchase a new or existing home. Repeat or move-up homebuyers are eligible for the credit only if they buy a new home.

Buyers of existing homes must close escrow between May 1 and December 31, 2010. The credit is available to buyers of new homes who sign purchase agreements between May 1 and December 31, and close escrow by August 1, 2011.

Separate from the California tax credit is the federal tax credit. The federal homebuyer tax credit will expire soon. If your clients want to take advantage of this tax credit, they must act fast. The tax credit is available to buyers who sign purchase agreements on a new or existing primary residence home between December 1, 2009, and April 30, 2010. Buyers have until June 30 to close the mortgage loan on their new home.

If you have any questions about how the California or federal tax credit may benefit your clients, call me today.  As your only Licensed Tax Professional and Certified Mortgage Planner,  it is imperative that you receive  the most current and reliable information. 

Distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification. Enacted into law yesterday, Senate Bill 401 generally aligns California's tax treatment of mortgage debt relief income with federal law. For debt forgiven on a loan secured by a "qualified principal residence," borrowers will now be exempt from both federal and state income tax consequences. The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

"Qualified principal residence" indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.

The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board's Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service's Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill 401 is available at www.leginfo.ca.gov.

For a more complete look at your situaiton call 916-893-9666 the ONLY Realtor Tax Professional!!!

As many of you know, the new credit card rules took effect nationwide last week. While definitely a "win" for consumers, they present "new" challenges as well that we will face from the credit card companies and banks. Let's start with how the new law will affect us:

1. The end of confusing billing practices Credit-card payments will be due at the same time each month, with notification of the bill made at least 21 days in advance of its due date. Payments will be applied to highest interest-rate balances first so that customers can pay off their balances faster and more cheaply. Finally, credit-card companies will be obligated to use plain language in plain sight” on all materials related to the account and periodically display on statements how long it would take consumers to pay off their existing balance and interest charges if they paid only the minimum due.

2. Interest-rate reform Nearly all interest-rate increases on outstanding balances will be prohibited and card companies must notify the consumer 45 days in advance of an interest-rate increase. Additionally, there cannot be wny interest rate increases for the first year any account is open.

3. Opting-in for overdraft and overlimit protections Customers will now have to opt-in to an overdraft program instead of being automatically enrolled. This means that if cardholders try to make a purchase that exceeds their limit or overdraws a debit account, their card will simply be declined. Under the old rules, the transaction could go through and the consumer would be fined.

4. Protections for young consumers Credit-card companies face greater restrictions on marketing cards to college students. More generally, those under 21 will have to prove that they have the means to pay off their card limits or have a cosigner before they can be granted a card.

The way in which the banks say that they will "compensate" for the billions of dollars of lost revenue that they say that they will face is through higher initial interest rates as well as higher fees.

Here's my BIG RECESSION BUSTING TIP of the day (Ok, Ok, it really came from Suzie Orman;):

Go to www.creditcardconnection.org and use the tool that allows you to enter your zipcode to find the local bank with the LOWEST interest rate on their credit cards. It's like magic!!  The federally chartered banks and lending institutions (such as credit unions) are capped by law an 18% finance charge, so why not save money AND support your local businesses? Brilliant!

MONEY SAVER:      Free Cellular Service! If you haven’t yet heard, you can now get T-Mobile’s National Unlimited Cellular Service package, including Tethering and unlimited Data Transfer, for FREE! That’s right - get rid of your cell phone bill. You can get their Flat Rate Unlimited Everything plan, usually $89.95/mo, for FREE by just referring 3 friends, AND those 3 friends get this same exact opportunity to get their service for FREE by bringing 3 friends, and so on! It’s the “Refer 3 and Yours is FREE” campaign. It’s easy to enroll. No contract, no credit check, no nonsense. Visit www.TheFreeWirelessNetwork.com and save that money to start your next business!

By now you’re aware of the new FHA guidelines which took effect last week regarding proper procedures for the ordering, management, and completion of appraisals for FHA insured mortgages (Mortgagee Letter ML 09-28; click here to view).

As California's leader in FHA financing, we are already set up with “third party organizations” referred to by FHA in the letter, we have access to technology and more than 50,000 appraisers – that is over half of the entire profession.  Accordingly, we’ve fielded many questions regarding how to incorporate the new FHA regulations into operations on both sides of the appraisal transaction. In order to save time as either a Realtor or Homebuyer, we’ve compiled this short list of questions and answers.

1. Aren’t FHA’s rules the same as the HVCC?  Not at all. FHA’s regulations are far more specific in numerous areas, such as the transparency of fees paid to the appraiser. FHA mortgagees must exercise caution; simply complying with the less-stringent HVCC is not sufficient. Unlike the HVCC, additional oversight of any AMCs used is required, since Appraisal Management Companies or "AMCs" may no longer force appraisers to not state their own fee in the appraisal report (as just one example). Ensuring compliance with these and other rules is the responsibility of the mortgagee. Since closing cost transparency is a thorny consumer RESPA issue, there are many touchpoints where the risk may be elevated if not properly managed from the outset.
2. How can we ensure that appraisers haven’t been influenced in the selection and management process? Unlike a costly interior “firewall” or outsourcing to an AMC, our network system features a complete “double blind” process -- a long-standing feature description of ours which was referenced verbatim in FHA's letter -- to be followed throughout the appraisal process. Lending staff can be shielded from any or all personal communication with the appraiser while still initiating the transaction and being kept informed of its status.
3. Can mortgage brokers order an appraisal without being in violation of the rules? Yes. The rules for mortgage brokers are the same as they have always been for agents or even for “any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan”. A lender would be in compliance so long as the appraiser is not “selected, retained or compensated in any manner” by the broker, agent, or commissioned staff. 
4. The new rules require that appraisers be paid fees that are customary and reasonable for their area. How do we know what that fee would be? The authoritative guide to customary appraisal fees is our national Appraisal Fee Reference™, or AFR™. The AFR includes independent fee statistics garnered from analyzing hundreds of thousands of appraisals, and reported as median fee references in all 3,221 counties and administrative districts in the United States, the District of Columbia, Puerto Rico, and Guam. Statistics are also available at the state, census district, census region, and national levels. The AFR is free of charge even if a you are not currently doing business with us. It's updated monthly with fresh data and automatically e-mailed to any and all compliance staff requested. To read more about the AFR and subscribe to your own copy, go to www.mercuryvmp.com/analytics.
5. How can we be sure that AMC fees are not mixed in with the appraisal fee, in violation of the new FHA regulations? Our Network is a Vendor Management Platform, not an AMC, and therefore does not add a surcharge to any appraiser's own stated fee. The appraiser only pays us a $13.75 transaction charge for use of our technology and service. Costs to the borrower are lower than in an AMC-managed transaction, and compliance with the FHA fee reporting requirements is assured.

We hope these questions and answers help you in your compliance planning as Realtors. For Homebuyers, these new rules are set forth to protect your investment and insure an appraisals is done with integrity.

 If you need any further assistance, please don’t hesitate to contact myself or my Team at (916) 893-9666

I am sure that you have heard that FHA is easing the flipping rules, however, trying to find investors who are willing to play is another matter.  Don't worry we are currently offering the program but these are the guidelines according to HUD with my interpretation:

The purchase transaction must be "arms-length" with no identity of interest between borrower and seller or any other parties participating in the transaction (Note: FHA defines “identity of interest” as “a sales transaction between parties with family relationships or business relationships.”) FHA suggests the following methods to assist in determining that no “inappropriate collusion or agreements” exist between parties to the sales transaction:

o Seller holds title to the property.

o If the seller is an LLC, corporation or trust, the entity must be established and operated in accordance with applicable state and federal laws.

o There is no pattern of “previous flipping activity” for the subject property.  2 or more title transfers within the most recent 12 months constitutes previous property flipping activity.

o The property was marketed via MLS, auction, for-sale-by owner or developer marketing. “Sales contacts that refer to an ‘assignment of contract of sale,’ which represents a special agreement between seller and buyer may be a red flag.”

o This is where the kicker lies since most investors want a greater than 20% profit, not including fix up cost: 

If the sales price is 20 percent or  higher than the seller’s acquisition cost, the property flipping waiver applies only if the lender obtains the following documentation:

1. Evidence the seller has completed sufficient legitimate renovation, repair and rehabilitation work to substantiate the increase in value (contracts and paid receipts and/or a second appraisal indicating repairs completed and the value of those repairs). If no or minimal repairs were completed, the appraiser must indicate the reason for increase in value since seller acquisition.

2. Copy of a property inspection completed by an inspector having neither an interest in the property nor a relationship with the seller. The property inspector must be paid by the lender, but the borrower may reimburse the lender for the inspection. The inspector may not pay anyone for referral of the inspection and may not receive compensation for referring or recommending contractors to complete recommended repairs. The borrower must receive a copy of the inspection report prior to closing. The inspection must include all of the following elements:

1. Property structure, including foundation, floor, ceiling, walls and roof.

2. Exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways.

3. Inspection of roofing, plumbing, electrical, heating and air conditioning systems.

4. Interior inspection.

5. Inspection of insulation, ventilation systems, fireplaces and solid-fuel-burning appliances such as wood stoves.

In addition, as of February 15^th, FHA now requires the appraisals to be ordered through an appraisal management company (FHA’s take on the HVCC process) so we no longer have control on what appraiser will review the property. So with the appraisers now making less on FHA appraisals and the risk of a property default on their shoulders if the property is over valued, I do not foresee too many appraisers giving “reasons” (and this interpretation is wide open!!) for the increase in value. Also, be prepared for the need of two appraisals.   

So this will open the market a bit for more FHA buyers, if you are listing any “flipped” properties, start prepping your seller for the items we will need for an FHA loan.   

Please feel free to contact me with any questions anytime... I work for you.  (916) 893-9666.  Kirk M. West

Yes, it's true.  After all of the hype, media coverage, back and forth, Congress has extended the homebuyer tax credit.  It doesn't stop there.  They have also expanded the guidelines that will benefit previous or current homeowner's as well.  Keep in mind there are important deadlines to consider if you are planning on purchasing a new home.  Read below to get the real life time frames that you need to seriously consider.

First, for the complete breakdown of the extension and expanded guidelines, click here.

In addition, here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit

Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a firsttime homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you're within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is "consecutive." As long as he lived in that house for 5 years straight what he did since 3 years doesn't impact eligibility.

Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 or July 1, worst case), the purchaser will be eligible for the credit.

Now that you have read over all of the details and FAQs about the extended credit I want to addres with you realistic timelines. 

Our market is comprised mostly of short sales.  The short sale process can take anywhere fro 4 to 8 or 9 months.  With this in mind, get out there and get into contract as soon as possible. If you would like to get some assistance in writing a stronger offer for yourself or your clients, call me now at 916-893-9666.  There are actually quite a few things that can be done to make sure your offer is accepted.  Most agents may not know this either so have your agent or Realtor call me too.

If you plan on purchasing a foreclosed home or REO (real estate owned) property it can take about 60 days to complete the transaction.  It may sound like you have more time to look if that is the case.  However, REO homes are highet in demand simply because they do close quicker.  I have found that my clients have had to make offers on the same day or within a few days at the latest on new REO listing. 

Lets talk more about how you can position yourself for a more aggressive offer.