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What Happens to the Loan Shortage in a Short Sale?

December 3, 2020 by heiseheisellp Leave a Comment

What Happens to the Loan Shortage in a Short Sale?

Are you losing sleep trying to keep up with your mortgage payments? Are you considering a short sale in Baltimore? Many of our current and former clients delayed in contacting us for assistance because they were concerned that the deficiency (the difference between the loan amount and sale price) was too large for their lender to approve. In my 10+ years of handling short sales in the Baltimore metro area, the most frequently asked question from new short sale clients during our intake interview is, “will the lender take this big of a loss?” In most cases the answer is yes. Not only will they approve a large loss, they typically waive the right to collect the loan shortage.

We have negotiated sales of homes where the deficiency has been as low as $4,000.00 and as large as $415,000.00. We discovered on most occasions a loss is a loss to the lender irrespective of how small or large the amount. However, the IRS generally treats any discharged debt as taxable income and it is included in your gross income which could lead to a tax liability. The Consolidated Appropriations Act of 2020 allows some borrowers to exclude up to one million dollars ($1,000,000.00), up to two million dollars ($2,000,000.00) for married couples, of forgiven debt from their taxable income for short sales of principal residences. While this provision is set to expire in 2020 it will apply to contracts entered into in 2020 that settle in 2021 so it is best to act quickly.

If you’re thinking about a short sale in the Baltimore area don’t delay any further, call our real estate law firm at 410-276-1983 to discuss the details of your situation.

Three Documents Necessary for Maryland FSBO Transactions

November 6, 2020 by heiseheisellp Leave a Comment

Three Documents Necessary for Maryland FSBO Transactions Hey there rebel, decided to go it on your own and sell your house without an agent as a for sale by owner (FSBO) transaction in Baltimore, MD? A FSBO sale in Baltimore, MD takes a great deal of preparation at the outset to get in the right position for a successful sale. You have to look at your house with a critical eye to determine what repairs need to be made and what needs to be done to punch up that always important curb appeal. You have to figure out which platforms are best for your marketing, Zillow, Facebook Marketplace . . . maybe a flat fee listing service. And you also have to do research to make sure you have priced your house properly so you do not leave money on the table.

After doing all the work to get ready to sell your Baltimore home as a FSBO and getting a potential home buyer who is willing to make an offer, what’s next? The buyer might be prepared to make an offer but there are documents and information you should have ready to hand over to them so they can prepare a complete offer. The following is a list of recommended documents sellers should consider having on-hand before you even have an offer.

Documents Needed in Maryland FSBO Transactions

List of Inclusions/Exclusions

This form lists all the appliances that you intend to sell along with the property, discloses leased items such as propane tanks or solar panels, and informs a buyer if the property is served by public water and sewer or is on well and septic. This information may lead a buyer to include addendums for the inspection of some of these items to occur prior to settlement.

Maryland Residential Property Disclosure and Disclaimer Statement

This form is required in most residential sales in Maryland and allows a seller to sell a property as is, so long as they reveal latent defects, (disclaimer) or a form revealing defects and other information about the condition of the property (disclosure). This form can be viewed here: https://www.dllr.state.md.us/forms/propertydanddform.pdf . A buyer must receive this form at or prior to the time the contract is entered into or they may have the right to rescind the offer.

Condo Resale Package

This is not one document but a group of documents that will have to be ordered from your condominium association. The package includes: a Declaration, Bylaws, Rules and Regulations, a notice of capital expenditures and other important documents and information. There is a fee for the package and it can take the condominium association anywhere from a few hours to a few weeks to prepare and send it to you. In Maryland you are required to provide these documents to a buyer at least fifteen days before closing and they have seven days from the date of receiving all of this information to rescind the contract and receive a return of deposit.

These is just a representative list of documents and information sellers should have ready for a potential home buyer as part of a for sale by owner transaction in Baltimore, MD. Some forms carry more weight than others and allow a buyer to rescind a contract if they do not receive them. If you are feeling a bit overwhelmed by this blog rest assured we are here to help!

Call our Baltimore, MD real estate attorney’s office today at 410-276-1983 for more information.

How to Spot a Leaky Basement During a Baltimore Home Inspection

August 21, 2020 by heiseheisellp Leave a Comment

leaky basement in a Baltimore house missed during home inspection

I get calls about this all the time from new Baltimore homeowners and the discussions are heartbreaking. A buyer settles on their new Baltimore home and after a few months, or even a few days, the first big rain falls and the basement leaks! Follow these three tips to help avoid basement leaks and water damage in your new home.

3 Tips for Your Baltimore Home Inspection

1. When you are walking through a property for the first time uses your senses. Does the basement smell musty? Do you see any signs of past leaks such as stains on exposed wood, drywall, doors or furniture? Is the furnace or hot water heater up on blocks? These are all signs of past water issues. Now the problem may have been corrected, but it is best to be on guard.

2. Familiarize yourself with different waterproofing systems and how they work. Recently, a buyer called and informed me that while there is a sump pump in her basement, there is no drain tile system to direct water into the sump pump. The only thing the sump pump was good for was to drain water that was pushed into it. Without a basic understanding of water drainage systems, you may think you are protected when you are one heavy rain away from disaster.

3. Attend your Baltimore home inspection and ask a ton of questions, especially a direct question about the inspector’s opinion on whether s/he thinks the basement leaks. If your home inspector expresses even the slightest concern that you may be buying a house with a leaky basement, get a professional waterproofing company into that property to take a look before you settle.

A home purchase is a huge investment and you need to protect yourself and your family. Do not let your emotions or a pushy real estate agent rush you into moving forward with a purchase without having all the facts, you may regret it later.

From FSBO to Short Sale in Baltimore County

June 18, 2020 by heiseheisellp Leave a Comment

baltimore fsbo to short sale client We recently handled a matter where a landlord passed away and the tenant was interested in purchasing the Baltimore County property from the personal representative of the landlord’s estate. We were engaged to prepare the contract for the tenant as a for sale by owner transaction. After the tenant’s lender received the appraisal it became clear the contract sales price was $30,000.00 higher than the value of the property. The problem here is that the sales price was dictated by the funds that were necessary to satisfy the landlord’s existing mortgage. What do we do here to salvage the transaction and get the buyer in the home?

Fortunately, the principal real estate attorney at Baltimore-based Heise & Heise, LLP is also an associate real estate broker with Douglas Realty. We were able to list the property for sale as a short sale, market it, and ultimately write a contract for the tenant. Through the firm, we handled the short sale for the landlord’s personal representative, negotiated a sales price that was $30,000.00 less than the original sales price and obtained a $5,400.00 credit for the tenant.

The landlord’s personal representative was able to benefit from a full waiver of deficiency and release of lien. For added convenience, we also introduced the tenant to a local Baltimore-based title company offering some of the best rates around and has a great deal of experience handling Baltimore short sale transactions.

All of the parties appreciated the convenience of such a streamlined process with all services offered through one central office. If you are experiencing a similar situation please call our team of Baltimore real estate attorney’s at (410) 394-9504 us so we can discuss how we can help and the services we provide.

How the CARES Act Can Help Baltimore Homeowners

June 8, 2020 by heiseheisellp Leave a Comment

CARES Act short sale home in Maryland We recently brought on a few short sale clients in the Baltimore, MD area who purchased properties just before the Great Recession of 2007-2009. These clients saw the value of their properties drop drastically once the recession hit and did not seen the values recover. Some owners continued to occupy the properties as their principal residence while others rented out the properties and were left paying any shortgage out of pocket and suffering losses month-after-month.

The current housing climate caused by the Covid pandemic presents a unique opportunity for these property owners to divest themselves of a huge liability, while minimizing the consequences to their credit score. How so? The Coronavirus Aid, Relief, and Economic Security (CARES) Act requires the lenders to report to the credit bureaus that the borrowers are current on their loan or account if the homeowners are:

current on their mortgage;
enter into a forebearance or other accomodation with their lender (allowing them to suspend payments)
and are meeting the terms of the agreement

How would this look? Let’s run out a scenario for context. A property owner has a former principal residence that is underwater by $100,000.00. S/he purchased another home and is renting out the former residence. The rent coming in does not cover the full mortgage payment and the owner is paying $500.00 monthly to cover the shortage. S/he could enter into a forebearance agreement with the lender, negotiate a 4-6 month suspension of payments, list the property as a short sale and have the property sold before the forebearance period expires. The lender would be required to report that the loan is current during the marketing period while no payments are being made.

Additionally, where a loan is already in default some lenders are willing to suspend negative credit reporting. How this is handled varies from lender to lender, but the key it to contact the lender and work out an arrangement.

If you have a client nurturing along a property with negative equity and is current on their mortgage, or is in default, now is the time to reach out and encourage them to enter into a forebearance or other agreement, list the property as a short sale, skip 4-6 months of payments, sell the property and not take a hit to their credit score for the skipped payments.

Please call the experienced team of Baltimore, MD real estate lawyers at Heise & Heise at (410) 394-9504 for more details on how we might be able to assist you.