What is a Luxury Short Sale in MN?
Short sales have become pretty standard for most Realtor’s that have done a few. To be honest with you I have done enough to wonder if I should even still have hair left on my head.
Short sales are long and painful for almost everyone involved. You don’t know when the short sale will close or even if it will close. I have been very blessed and 98% of the ones that I have done have closed.
That being said with the market rebounding now do we still have short sales out there? Well the lower price ranges to the biggest hit back from 2009 to 2011. Folks in the luxury home arena have been able to hold out allot longer.
Here is the big problem with the luxury home market in general. When buyers are paying over $500,000 for a home, they have the money to wait for the price to drop on a home they like or they can build a new custom one or they can knock down a old one and get the location that they want and the new home they dreamed of.
Where does that leave you if you bought a luxury home in 2005-2007? Well it depends on how deep your pockets are and what your plan is. I have some luxury home owners that want to build a new custom home. We have to then sell it to get them the most money and they pay the difference. We also help those out on the list side when they build with us so the pain is less.
Those who don’t have the money to bail themselves out of their underwater luxury mortgage are left with three options typically;
1. Let foreclose and still have to pay the difference in what the bank that forecloses on it sells it for in tax since the debt forgiveness act has been renewed at this point. Also pay an 2nd or more lien that may sue them.
2. Keep paying on house and hope some day that it will be worth enough that they can get out. This is an up hill battle for those that are in there late 50′s and now what to look towards retirement and still are stuck with a bad mortgage.
3. Short sale the luxury home and still have to pay the tax difference unless they redo the debt forgiveness act this year.
Well all those answer are a lot of fun, not. The truth to the situation is that short selling the luxury home does the least amount of damage to your credit, the bank may pay you to move out of the home, and it allows you to know how things are happening instead of them happening to you without your knowledge. One of my clients was very concerned that a sheriff would come to his door. Through the short sale process they got to live there for free since a luxury short sale requires you to stop making payments (and most luxury home owners can’t afford it anyways if they are in this situation)for the bank to take you seriously. They wanted to down size to a condo so they were happy to be out of the big home and the bank paid them to short sale and close.
Is there a difference between a normal short sale and a luxury home short sale?
Yes there is a huge difference. Most Luxury Realtor’s don’t do short sales and most regular short sale agents do more volume than work with luxury homes. On top of that the complexity of a luxury short sale is so much more.
Regular short sale a home between $100,000 and $300,000 you will have the following:
Possible Association lien
Minnesota redemption period (by the way short sales can be done in redemption)
Luxury home short sale you will have the following:
Minnesota redemption period (by the way short sales can be done in redemption) 6 month for under 2 acres and 12 months for over.
And then there is the big kicker THE IRS TAX LIEN. This is where the IRS found that a luxury home owner couldn’t pay their income tax so they throw it on the house. I think this is where most short sale agents get hung up since the amounts of a tax lien are typically in the $300,000 plus range.
I don’t! I have an expert that can have IRS tax lien removed because the IRS finds the home valueless. Why, well heck typically we can’t even cover 3/4 of the first lien less or not the IRS and all the others.
Does this remove the IRS lien from the individual? NO it stays with them but the house is released so that it can be short sold.
What happens if you just let a Luxury home in Minnesota foreclose? Well one of two things; you will have judgement against you and you will have to pay the difference in the amount that you owed and what the bank was able to recover(unless they re-in act the debt forgiveness act which covers you up to a million) or second option you will still pay the taxes and claim bankruptcy (I have a good attorney if you need one).
Remember all mortgages/liens on a luxury home which can be in the hundreds of thousand dollar range are personally secured loan also and they can come after even after the foreclosure. If you do a short sale they have to be negotiated and they typically have to listen to the first mortgage request.
All I can say is that I have done them and with the help of god they work out in the end and it is better than a foreclosure. I keep all information confidential and we work to keep the transaction as discrete as possible. It is common not even to put a sign in the yard.