What does it do, really? The IRS has a clever way of getting taxes from you familiarly called “phantom income”. let’s say that you go into foreclosure and your lender loses $50,000. They send a 1099 form to the IRS and the IRS treats this as income. So if in 2011 you were in a 25% tax bracket and that was the year of foreclosure you ower the IRS $12,500 plus interest and penalties, and they will get it and at that point you can’t bankrupt it out. The Act says that if you do a successful short sale instead you do not owe any taxes on a lender’s loss. This encourage people to do short sales because they are fiancially distressed so 5 figure tax bills adds “insult to injury”, and the IRS can seize your bank account down to the very last dime. So here we are at the end of May 2012, we are in an election year where the parties are even more uncooperative and non-productive if thats possible, and this act fell under the radar.

How Does it help?  First, the lender increases their loss by around 50% in a foreclosure versus a short sale, and the bigger the loss the worse the balance sheet, and lending becomes even tighter. Second, a short sale is close to a normal sale and is not treated like a foreclosure sop the impact on your home value is much less than foreclosures around you, so if you are not distressed but those around you go to foreclosure instead of a short sale with the loss of this incentive then you are affected. Finally, think of $12,500 going to the IRS versus money spent on clothers for the children, food, and local services, so your community is impacted by this loss of spending.

Short sale versus foreclosure:   Real estate is one of the best job creators. it is not just about our commissions and jobs, it is the jobs at lenders, at appraisal companies, with professional tradesman, with Home Depot and Lowes, becasue when a house is for sale or sold these services are used. If you do a short sale and get this incentive of no tax burden and you can now buy a home in two years versus five years then the economy as well as families are helped. Also don’t forget about the lessening of home values because for the middle class, home equity is often the biggest component in personal wealth. we are all in this together.

Why should it be permanent?   First, the housing crisis is far from over. if we take defaults, foreclosures, and underwater equities over 25 million homeowners are in this category we call the shadow inventory. Many states like Oklahoma have long periods between default and foreclosure because everything has to go through a judge before foreclosure can really start so 2013 should be a short sale year for Oklahoma and many other areas more financially impacted by the recession are years away from true recovery, and this means in my opinion that without this act being extended you will see fewer short sales and more foreclosures and bankruptcies, none of which are good for us. Now to being permanent, remember that I said I did my first short sale over 16 years ago. Financial distress is not goin away and in fact i believe it will get worse. We have a new generation coming up, Gen Y, and these folks are burdened by student loan and credit card debt like no one before them. We have already done short sales because of young people’s student lioan debt alone. We need this incentive to be permanent for long term protection of what i think we all believe still to be a huge part of The American dream.

Contact me: If you are a financially distressed homeowner in the greater Oklahoma City Oklahoma area and you are having trouble making ends meet and your mortgage payment youc annot afford to wait to see if Congress will extend this because there is serious doubt it will be, or trying for a loan modification that has an extremely high eprcentage of turn downs. We will help you opursue that and other options but most of the time the short sale has your best interest at heart for future financial stability, and has many other fiancial incentive attached to it. For more information about short sales go to http://www.avoidforeclosureoklahoma.com, this is our website devoted to up to date information about short sales versus foreclosure, ot you can contact me through this website, or email me at jeo@joepryor.com. We want to help.

The biggest problem i face is that the emotional distress is so great it sometimes leads to decision paralysis. This is especially true for families. The children have neighborhood firends, are in a school system that is familiar, and the home is almost like the family sanctuary from all the ills of the world. So too often i see people “go down with the ship”. The problem is that they can’t see past the veil of tears and remorse to understand the economic impact and the toll that is put on the family that i believe is even worse. Take it from my, fiancial distress leads to tension in marriage partners, and whether you are openly fighting about it or not, the children know something terrible is wrong. Not only that, what happens after a foreclosure is potentially worse. IRS tax leins on the loss, possible deficiency judgements from the lenders, the huge drop in the credit report, and the 5 year waiting period for buying another home all conspire to put your family is worse financial jeopardy.

Please understand I am not saying well just suck it up and do the short sale and don’t let your emotions show, that is not the right way to handle stress. But openness t o realizing that family and firends are much more important than bricks and mortar means that harmony is hard to replace, but a place to live is. The other aspect is trying to secure your sound financial future and controlling the damage should not be minimized. Even a bigger factor is getting back ion control. A short sale is your choice and eliminates most of the future issues, a foreclosure is imposed on you and cannot be rescinded. When I meet with Oklahoma City financially distressed homeowners I show them the financial differences between a short sale and a foreclosure and the difference is startling. I show them that rather than throw money at a hopeless situation they can build a financial nest egg that means a brighter future, not a regret about the past.

If you are a financially distressed Oklahoma City homeowner and need a specilaist that will tell you the truth while understanding what you are going through emotionally because I have been there before, I want you to contact me.  We have a high success rate because we know what to do and we have a passion for rescuing families from foreclosure. I can be contact by email at joe@joepryor.com, or if you want to go to our resource website that is devoted to giving you answers about a short sale versus foreclosure go to http://www.avoidforeclosureoklahoma.com.

Do they value home ownership? The first problem we deal with is a psychological one, do they even believe in owning an home in Oklahoma City or anywhere? This is a group who in their teens and twenties experienced the housing bubble and the later bursting of that bubble. They saw parents and friends of parents treating their home like an ATM machine. If they needed money for a risky real estate ventrue, pull money from a home equity line for the money needed. If they wanted a second home, a boat, a new car, or an expensive vacation, refianance the home since real estate only goes up. The idea of home ownership as part of the American dream was perverted and sold like it was coming from a snake oil salesman. As REALTORS® we need to reestablish the home as a centerpiece of American life, a conservative purchase no doubt, but one that is a part of our freedoms.

Debt, Debt, and more Debt: This is the first full generation that was victumized by the debt machine. Credit cards were being sent to college freshman to start them on debt as a good thing. An industry was created that encouraged this and made you think that if you didn’t use high interest cards something was wrong with you. They told them, hey we will give you something and you don’t have to start paying for it for six months! Plenty of time right? Wrong because more debt was piling up. Add to this these same companies lobbying Congress successfully to make sure you couldn’t bankrupt your way out of the debt. You might get the idea that I detest this industry and on that you would be right. Hopefully this same lobby and industry will not be able to block consumer protection agencies and laws, but believe me, the lying machine is in full swing.

Student Loans: The cost of college is skyrocketing. Students can’t just go to their parents and say, Hey Mom and Dad, I need $200,000 for the next 6 years so I can get the skills to get a job. Even with a parent supporting you and a job, student loans are a fact of life. Again in almost all cases this debt cannot be discharged in bankruptcy. College is again becoming and institution only for the previleged. I won’t get political about this but we have to look into the education system and fix something that is becoming out of reach and destroying access to the American dream.

Unemployment: Gen Y has the highest rate of unemployment of all adult generations. The go to college get a job is being subverted by the economic upheaval that started to show itself in 007 and roarded into 2008. All REALTORS® need to get behind real reform and job growth regardless of where the money comes from. Unemployment is draining the coffers of this country and this generation is especially vunerable right now.

Our responsibility: I am a great believer in free will but even more so I am a believer that real estate agents need to be guided by strong core values and a dedication to doing the right thing. When we are dealing with this new group of buyers we need to be totally aware of what their liabilities are. I have done too many short sales for young people whose student loans caused a hardship. If they can quality for $1200 a month we should be looking for deals that keep the pauyments much lower/ To max out an Oklahoma City area Gen Y buyer is just not responsible. At closing, give them a gift like a Dave Ramsey “Total Money Makeover” book, or “The Millionaire Next Door”. Give them the wisodom of what you have seen in your life, and if you are a Gen Y REALTOR® talk to your elders about the past. This is a great group of people coming up that give me confidence that our country is in good hands. They are the most caused based and community oriented group I have seen since my Boomer Group was around and young, and I think they are even better. Let’s do the right thing for them because if we do they will be back for the next home as they build their families and their future.

If you are a Gen Y buyer and want to deal with an ethically grounded and cause based group of agents in Oklahoma City we are here to help you. Check us out at http://www.virtualrealestateteam.com or contact me at joe@joepryor.com.

Interest rates: We should expect interest rates to stay low. All administrations like to keep rate s low and when you add in the increased government spending and borrowing during economic downturns we can believe that rates will be low the rest of the year. In fact we have one Oklahoma City credit union that is offering a 30 year adjustable mortgage that starts at 1.9% and caps at 6.0. With rates like that and with credit restrictions becoming more liberal, more homeowners and investors will be in the market.

Real Estate Sales: Sales for the greater Oklahoma City area maintained a 36% increase over last year in the first quarter. This has created an upward pressure on prices because of low inventory so appreciation is real in 2012. There is no reason to assume that this is temporary because again the borrowing rate is so low.

Inventory of homes for sale: This may be the biggest factor since we entered 2012 with the lowest inventory level in 5 years that combined with the dramatic increase in home sales in Oklahoma City. The other determinant is that we have had a very low amount of distressed properties on the market as short sales and foreclosures. These types of homes in larger quantities can be a drag on the market because of lower prices. The other interesting fact is the increased number of homes being refinanced rather than put up for sale and this also keeps the number of homes for sale very low.

Distressed Properties: What about distressed properties in Oklahoma City? The bad news/good news is that they are coming. Oklahoma did not experience the first round of foreclosures because we were not a sub-prime oriented state. However, the general national economy has in the last 5 years created stress, and for various reasons our “shadow inventory” has not hit the market yet. Partly this is due to the potential liability that big lender were looking at with the State’s Attorneys General and the ongoing settlement. Now that it is basically agreed to, lenders are starting to let inventories of foreclosures hit the market here so we actually have a significant number coming starting in May. Read on to the next paragraph now for the good news.

Investor Demand: The level of commitments I have for rental inventory is the highest I have had since the end of 2008. Most investors are looking for deals and short sales and foreclosures are the deals, so when you realize that low inventory of homes with equity combined with high demand are creating a seller’s market, then distressed property is what the doctor ordered for investors. Expect this inventory no matter what the size to be absorbed by investors and because of this it will not affect Oklahoma City home appreciation. Also take note that many of these properties need fix up so investors will be improving the quality of the neighborhoods by taking vacant properties and homes in blighted areas and putting them into rental condition.

The Economy: As I have previously blogged, Oklahoma City is leading the nation for large cities creating the most jobs. We are also one of the leaders for the highest gain in income levels. The simple fact is if you want a vibrant housing market you need people with good jobs and good pay to buy them. Lucky for us we have one of the most stable economies in the United States.

If you are a future buyer, a homeowner who wants to move up, or an investor who wants to build wealth by investing in Oklahoma City real estate, our team can help you. You can search the database of Oklahoma City homes for sale on our websites, or contact me at joe@joepryor.com and we will set up a plan for whatever your needs are.

The second problem is even bigger and this should not surprise you, Lobbyist. Elimination of loopholes and tax incentives are fine with lobbyist as long it is not who they are representing, so the hope of stopping some wastful spending was all but kaput. Reality set in and also the need to spend money on reforming systems and departments like the DHS overhaul that will cost $150 million a year for the next 5 years. It is refreshing to know that njot all politicians are idiots, in fact they are well aware of what it takes to be re-elected. So imagine the meeting among them when they discussed what their constituents would do when their porperty taxes at least doubled to help make up for the deficit, and how about all the self employed licnesed people who were facing a tax on everything they do which emans they would raise the price of your plumbing repairs, or fence cost, or landscaping, or just about everything that increases the cost of living.

Now this is not a rant that government is always right, and that more spending is always better than less spending. This is a post about reality testing when either the cost of services and home ownership goes up, or the necessity of cutting services that you depend on goes away. Governing a state is hard, and  even if I don’t agree with certain decisions I realize that I am not the one casting the vote. This does not mean that we don’t still have somne craziness at a state level to deal with, we do. For now we will focus on home ownernship and the threats that create a barrier or financial hardship that this would have done.

In my summary of the 6 part investing in Oklahoma City real estate series, I will discuss how you can defer taxes on resale by investing in real estate with your equity received as well as a summary of what we covered in the 6 videos. If you are interested in knowing more please email me at joe@joepryor.com and we will set up a program for you. If you want to check out what is for sale in Oklahoma City in real time, go to http://www.joepryor.com or go to our team site http://www.virtualrealestateteam.com and sign up for our home search.