INVESTMENT OPPORTUNITIES
WHAT ON EARTH IS A SHORT SALE?
Occasionally we still hear real estate agents whisper "What exactly is a short sale?" It's no surprise then that much of the public is still grappling with that term and the ramifications involved therein.
When a seller must sell his property in a declining market, it is not uncommon to find he is upside down - owing more than the market value of the home. A real estate agent helps the homeowner determine a realistic listing price for the property with the hope that a bona fide offer will influence the lender to work with the homeowner toward a successful conclusion. A short sale, simply put, means that the listed price of a subject property is less than - or short of - the amount of the mortgage.
Participation on either side of the transaction - as buyer or seller - takes infinite patience. Lenders are not typically rushing to the table to accept offers at less than they are rightfully owed. In most cases they will not enter into any short sale dialogue until after there is a bona fide offer presented. At that point, the wheels begin to turn, albeit slowly. There may be some negotiation involved and it is not unusual for the lender to require a higher price than what was offered. The amount of time involved from offer to acceptance or rejection can run into months.
Short sales are not for the faint-hearted but they can be a viable solution to an otherwise insurmountable problem.
FORECLOSURES
There is no ambiguity in the term "foreclosure". It’s what happens when a homeowner is in a mortgage default situation and a satisfactory financial agreement cannot be effected between the lender and the homeowner. It is the point at which the subject property reverts to the lender. You may also hear the term "corporate owned" or "bank owned" properties, both of which may indicate a foreclosure. Many of these properties are in a distressed condition. They are typically sold "as is" so it is in the potential buyer's best interests to secure a thorough home inspection before moving ahead with a purchase. The good news is that there may be negotiating room in the buyer's favor and the closing process is usually speedy. In a declining market, foreclosed properties offer a strong investment opportunity. If you are considering a foreclosure purchase, the Riley-Starr Team will work with you every step of the way to avoid other possible pitfalls.
UNDERSTANDING 1031 EXCHANGE
According to the Internal Revenue Code 1031:
"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment."
In other words, thanks to the IRS, a properly structured exchange allows an investor to sell a property, reinvest the proceeds in a new property and to defer all capital gain taxes! Section 1031 tax deferred exchanges continue to increase in popularity as more investors nationwide discover the wide range of investment objective that can be easily met through a property structured exchange. Those objectives include preservation of equity, leverage, diversification, management relief and/estate planning. If you're already utilizing this powerful leveraging technique, kudos! If you aren't, and would like additional information, let's talk!
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