Outer Banks’ tourism up in June despite economy 

A recent article in the Virginia-Pilot (Outer Banks’ tourism up in June despite economy) pointed out some positive news for tourism on the Outer Banks. 

More people visited the Outer Banks in June 2008 than in June 2007 despite a slowing economy, soaring gas prices, drifting smoke from two area wildfires, and beach closures due to nesting birds. 

The Virginian-Pilot of Norfolk reported that statistics compiled by the Outer Banks Visitors Bureau show a 7 percent rise in occupancy in June over the same period last year. The figures show that the gains were in rentals of houses. Occupancy at campgrounds, hotels, and motels were down in June. 

Visitors bureau director Carolyn McCormick says the overall gain shows the viability of the Outer Banks, and she remains “cautiously optimistic” for the remainder of the year.   

Consumers looking here. Realtors advertising there?

77% of consumers searched the Internet for information regarding real estate. That is compared to 33% for print. Not surprising, right? What is surprising is that the biggest share of a Realtor’s advertising spend at 40% is print.

A titanic disconnect of where consumers look for real estate and where Realtors advertise.

Based upon a recent study by Yahoo! Inc., here are the results:

• Home buyers and sellers consider approximately two agents on average before making a final decision.
• The Internet impacts consumer trust. Forty percent of respondents credited a site in increasing their trust in the agent.
• 74 percent of people who accessed an agent Web site got there with the help of a search engine.
• The online research process is quick and intense: consumers spent an average of 12 hours online researching agents and 75 percent selected an agent within one week of starting their search.
• 45 percent of respondents used the Internet to learn about agents they didn’t know existed.
• 41 percent discovered special deals and promotions offered from an agent through the Internet.

What is clear is that home buyers, and consumers in general, are moving toward the Internet, not away from it. Shouldn't the savvy Realtor be moving their dollars there as well?

By: Ed Kim

Example Customer Websites

www.livingonthemainline.com

www.harrynormansells.com

www.buysarasota.net

www.tucsonhomeconnection.com

What is and is not a Short Sale?

A short sale is an arrangement between a homeowner and their lending institution to accept an offer on the home for less than the total amount owed on the property. 

A bank-owned house, or foreclosure, is not a short sale.  A seller deciding to lower their price and take less profit is not a short sale.    To have a short sale, one of the parties has to be "shorted"; either the seller or the bank.

To further explain the difference; with a typical foreclosure situation, homeowners fall behind in their payments and the bank repossesses the house and sells it.  In almost all cases, the bank pursues the homeowner for the deficiency (the difference between the amount owed and what the bank collects at the short sale).  The only real way out of this type of situation is to file bankruptcy.

In the case of a short sale, a homeowner owes more for their house than they can sell it for.  In other words, they are upside down.  With a short sale, the owner goes to the bank and tries to arrange for the lender to forgive the difference.

What about the Deficiency?

Because of the large and growing problems with homeowners defaulting on their loans, the rules about short sale deficiencies have changed.  Previously, the deficiency could be 100% loaned to the seller in the form of a promissory note which would have to be repaid.  If the bank wrote off any portion of the deficiency, this would be reported on the owners 1099 as income.  New and important tax rules have changed this!  If the home that is the subject of the short sale is a principal resident - vs. an investment property - and that home is worth less than or equal to $2 million, the tax on the deficiency will be forgiven.  This is huge.

How Does A Homeowner Qualify for a Short Sale?

There are four criteria a homeowner must meet to qualify for consideration by the lender for a short sale:

1. There must be a demonstrable financial hardship, e.g., a lost job or material change in the financial situation;
2. There must be a monthly shortfall;
3. There must be insolvency, meaning that the owner does not have the money to pay down the mortgage; and
4. The owner does not have any assets to sell to pay for the shortfall.

What is an acceptable Hardship?

There must be a hardship that is preventing the owner from being able to pay their mortgage.  Examples include: 

Loss of job

Business failure

Damage to property

Death of a spouse

Death of family members

Severe illness

Divorce

Inheritance

Mandatory job relocation,

Medical bills

Military service

Payment increase or Mortgage adjustment

Insurance or tax increase

Reduced income

Separation

Too much debt

Incarceration

What is the Insolvency Requirement?

The owner must not be able to pay down their mortgage.  To qualify for a short sale, the homeowner must be financially insolvent.  This means that they owe more than they have and they do not have liquid cash or assets that could be used to buy-down their mortgage.

If the owner does have liquid cash or assets they will be expected to use them to pay down their mortgage.  There could be a scenario where an owner made a contribution towards the sale of the property and the lender covers the shortfall.

A short sale is not a way to get out of a mortgage.  It is a tool for a borrower to use when they truly can't pay their mortgage.

Short Sale vs. Foreclosure

The major difference is that a foreclosure is a credit item that can last forever and a short sale is not.

Prior to 2007, a homeowner would receive a 1099 for any debt that was forgiven in a short sale or a foreclosure.  In effect, the cancelled debt was considered income.  The Mortgage Forgiveness Debt Relief Act of 2007 changed this rule.

From January 1, 2007 to January 1, 2010, the tax on debt cancellation in a mortgage discharge situation is eliminated if the debt was incurred in the acquisition of a principal residence and he cancelled debt is less than or equal to $2,000,000.

Debt from a second mortgage or HELOC is not eligible nor is cancelled debt from investment properties and second homes.