Thursday, December 27, 2007
Worst-performing City: Miami
Shares of homebuilders were trading mostly lower on Dec. 26. Toll Brothers (TOL) lost 0.3% to $21.11, KB Home (KBH) slipped 0.7% to $23.46, while Lennar (LEN) edged up 0.1% to $17.91.
Among the 20 metropolitan areas, Miami posted the largest decline. Home prices in the Miami metropolitan area fell 12.4% in October compared to the same month last year, surpassing Tampa, Fla., as the worst-performing city. Tampa posted a year-over-year loss of 11.8%.
Besides those two cities, Detroit, Las Vegas, Phoenix, and San Diego also posted double-digit year-over-year declines.
Atlanta and Dallas, which had previously posted price appreciation, fell in October. Prices fell 0.7% in Atlanta and 0.1% in Dallas compared to a year earlier.
Only three areas—Charlotte, N.C.; Portland, Ore.; and Seattle—posted year-over-year home price appreciation in October. Charlotte posted the largest gains at 4.3%.
BUSINESSWEEK - December 26, 2007, 11:52AM EST
Short Sale means negotiating with the bank to accept less than is what is owed as payment in full. This mostly work on properties that are upside-down in value.
It would work like this: the loan amount is $200,000, current market value $180,000, an offer comes in at $175,000, closing cost $8,000. Net to the bank $167,000. This leaves a deficiency of $33,000.
Lender may take several approaches to this:
1. Not to forgive the debt and issue a deficiency judgment.
2. Request a promissory note for the difference. Lenders would normally have the homeowner sign a promissory note for a portion of the debt and spread it out between 1 – 10 years at a 0 to 2% interest rate.
3. Finally they can forgive the debt and write off the loss. The IRS will issue a 1099.
A 1099 means that the homeowner would need to pay taxes on the deficiency, which based on their tax bracket, can vary from 15% to 33% or more. However if the homeowner can prove insolvency, the 1099 becomes null. With the new bill passed The Mortgage Forgiveness Debt Relief Act of 2007 mean the forgive debt is really forgiven by the IRS