[HLS]

FEAR: perhaps a CPA will answer.
On your principal residence, I don’t know if you can write off the loss at all, if actually SOLD at a loss.

I think that $3K ONLY applies to stock market losses, to discourage speculation.

In a short sale, you are not receiving any money. Lender is agreeing to “settle” and your debt is being forgiven. The debt relief is reported as income, and you owe income tax. The debt is done. With a RENTAL, I believe that you are selling the property for what the lender reports, but if a rental, you have depreciation to recapture as well.

There is no ordinary income from the house sale, but I do THINK that you can write it off as an investment loss, (without $3K limit), and carry forward if necessary.

Foreclosure is viewed differently depending on whether or not it was purchase or refi loan that is being defaulted on.
There are also convoluted ways, like keeping your 1st current and let the 2nd default. Then the 2nd could takeover the 1st, without a default on the 1st.

Further, my belief is that BK will not absolve you of debt to the IRS.

This is the danger of a short sale that many don’t seem to be aware of. Receiving a 1099 isn’t a guarantee, but most people aren’t in a position to worry about that, or not do a short sale to avoid the 1099.

The lender doesn’t accept a SS just becuase you want them to, and for reasons mentioned previously, it’s not so easy on a rental property.

[HLS]

Patient, I’m not sure that we disagree. I don’t understand your point. You mention “people involved in supplying the loans” and “alerting the buyers of the loans”

Perhaps you know the below already;

Loans are sold off in huge portfolios that were underwritten to the standards of the “buyers of the loans”

“People involved in supplying the loans” didn’t force the buyers to take them. Each lender knew what their available line was for funding on an ongoing basis and loans were delivered.

The problem with subprime lenders arose when payments weren’t made (defaults) in the first month or two after origination, and the buyer wanted to return the loan to the supplier and be reimbursed. Many times the lender hadn’t made much on the loan, only a tiny %, but was faced with the buyback of a $500,000 loan. Multiply that times dozens or hundreds and you see where the collapse comes in.

The ultimate buyer of these subprime loans was Wall Street.
If I understand you above, you say that the WS buyers should have taken the responsibility and I AGREE with you, however, they were able to return the quickly defaulting loans which triggered the collapse of subprime, so they really weren’t taking ALL the responsibility.

Anyone with a basic understanding of math should have known that loaning 100% freely was going to lead to defaults.

It’s EXACTLY what credit cards do. they loan 100%, but compensate for the risk by charging 15%-35% plus fees to the honest group, and write off the non performing loans.

Where do we disagree ??

[HLS]

Patient, I’m not sure that we disagree. I don’t understand your point. You mention “people involved in supplying the loans” and “alerting the buyers of the loans”

Perhaps you know the below already;

Loans are sold off in huge portfolios that were underwritten to the standards of the “buyers of the loans”

“People involved in supplying the loans” didn’t force the buyers to take them. Each lender knew what their available line was for funding on an ongoing basis and loans were delivered.

The problem with subprime lenders arose when payments weren’t made (defaults) in the first month or two after origination, and the buyer wanted to return the loan to the supplier and be reimbursed. Many times the lender hadn’t made much on the loan, only a tiny %, but was faced with the buyback of a $500,000 loan. Multiply that times dozens or hundreds and you see where the collapse comes in.

The ultimate buyer of these subprime loans was Wall Street.
If I understand you above, you say that the WS buyers should have taken the responsibility and I AGREE with you, however, they were able to return the quickly defaulting loans which triggered the collapse of subprime, so they really weren’t taking ALL the responsibility.

Anyone with a basic understanding of math should have known that loaning 100% freely was going to lead to defaults.

It’s EXACTLY what credit cards do. they loan 100%, but compensate for the risk by charging 15%-35% plus fees to the honest group, and write off the non performing loans.

Where do we disagree ??

[HLS]

Bulls make money, Bears make money, Pigs get slaughtered.

the truth doesn’t change.

Fear: I can hear that Texan Cowboy drawl now. I LOVE it!
“easiest money ah evah made”

As I alluded to, not everyone went to biz school.
Many are still “well” invested.

Did you hear the one about the Texan and the pigeon after the oil bust ??…..

The pigeon could still make a deposit on a Mercedes 😉

[HLS]

Bulls make money, Bears make money, Pigs get slaughtered.

the truth doesn’t change.

Fear: I can hear that Texan Cowboy drawl now. I LOVE it!
“easiest money ah evah made”

As I alluded to, not everyone went to biz school.
Many are still “well” invested.

Did you hear the one about the Texan and the pigeon after the oil bust ??…..

The pigeon could still make a deposit on a Mercedes 😉

[HLS]

Patient, of course you know of what you speak.

We can look back at the loans originated in 2005-06 and conclude that now…It’s easy to say that now. Personally, I wouldn’t have invested based on 2003-04 loans either.

If you have been in OC very long, you remember the crisis of the county. The treasurer had invested in crappy bonds, looking for the yield. OC bonds were cut to junk. Even NYC was on the verge of BK before Giuliani.

Society has demanded more value for their money. Whether it’s buying inferior products for a cheaper price OR wanting higher yields on investments.

The sad/crazy/reality is that it’s STILL happening on Wall Street. Money flow into the markets have never been greater.
Millions of educated and not continue to “invest” because of the perception. It will take a true crash to cure a generation of this sheepish thinking, like it did in 1929.

Do you really think that the brightest and finest MBA’s and Wall Street geniuses didn’t KNOW that historically low interest rates combined with 100% STATED income financing
with the creaton of MBS in the 90’s was going to create a crisis at some point ?? It was brilliant manipulation.
You think they care who would ultimitely get hurt ?

$$ Millions $$ have been made by many. Some people think that they have done well making a few hundred grand in equity, and they have, but not because they are smart.
The guys that made millions in the same period are the smart ones.

I was involved in local real estate in the late 80’s and early 90’s. I saw what was going to happen the last few years with crystal clarity. I’m no genius. I got out.

See me post above. You have to accept that the “other” players control the market, not the sensible ones…

To address your comment above, I agree, but the fact is that buyer’s do not understand what they are buying!
I think that you know this. ‘Nuff said ?

[HLS]

Patient, of course you know of what you speak.

We can look back at the loans originated in 2005-06 and conclude that now…It’s easy to say that now. Personally, I wouldn’t have invested based on 2003-04 loans either.

If you have been in OC very long, you remember the crisis of the county. The treasurer had invested in crappy bonds, looking for the yield. OC bonds were cut to junk. Even NYC was on the verge of BK before Giuliani.

Society has demanded more value for their money. Whether it’s buying inferior products for a cheaper price OR wanting higher yields on investments.

The sad/crazy/reality is that it’s STILL happening on Wall Street. Money flow into the markets have never been greater.
Millions of educated and not continue to “invest” because of the perception. It will take a true crash to cure a generation of this sheepish thinking, like it did in 1929.

Do you really think that the brightest and finest MBA’s and Wall Street geniuses didn’t KNOW that historically low interest rates combined with 100% STATED income financing
with the creaton of MBS in the 90’s was going to create a crisis at some point ?? It was brilliant manipulation.
You think they care who would ultimitely get hurt ?

$$ Millions $$ have been made by many. Some people think that they have done well making a few hundred grand in equity, and they have, but not because they are smart.
The guys that made millions in the same period are the smart ones.

I was involved in local real estate in the late 80’s and early 90’s. I saw what was going to happen the last few years with crystal clarity. I’m no genius. I got out.

See me post above. You have to accept that the “other” players control the market, not the sensible ones…

To address your comment above, I agree, but the fact is that buyer’s do not understand what they are buying!
I think that you know this. ‘Nuff said ?

[HLS]

JWM , I could expound upon my posts, but they might be too long already.

Many people on this board are well educated and experienced, regardless of their opinion or whether they are a bull or bear.(I think that you and I agree about the overall economic risks)

The fact is that MANY average people have made a substantial anount of money, either on paper or in reality, because they got LUCKY.
They didn’t follow any traditional theories. They just bought when they could, regardless of market timing.

When a $90,000 house brought in $900 a month rent, I was a buyer. When the house doubled or tripled and the rent went up 25%, I was out, with a happy profit, and invested elsewhere.
I never intended to hit the top of the market.

The ones that bought at 2002-03 prices did pretty well, but only by luck, IMO. 2007 market could have been 2004 instead.

My point is that common sense and economic theory do not hold up when you have so many players in the game that don’t have the same education or experience.

The stock market is the next unlevel playing field.
People are throwing piles of money into funds without understanding what they are doing and the risks, they are sheep following blindly.
They don’t know the difference between P/E, P/S or Market Cap. Some are getting lucky.

When the vast majority of people are in and giddy and happy about a market, I’m pretty much out.
I’ll gladly sacrifice the potential extended gains, so I can sleep at night.

When people are scared, afraid to buy and think that the world is coming to an end, my interest is piqued.

You can get rich in value stocks buying when the news is terrible and it looks like the company is going out of business compared to what you can make when the stock breaks above the 200 day MA, and you are looking for a 25% gain. It may have already moved 200%-500%. It’s not unusual at all, but most people only know to buy the highs, and are scared at the lows.

I’m sure that you know that we may be too conservative for our own good, or at least to want to participate with the sheep.

[HLS]

JWM , I could expound upon my posts, but they might be too long already.

Many people on this board are well educated and experienced, regardless of their opinion or whether they are a bull or bear.(I think that you and I agree about the overall economic risks)

The fact is that MANY average people have made a substantial anount of money, either on paper or in reality, because they got LUCKY.
They didn’t follow any traditional theories. They just bought when they could, regardless of market timing.

When a $90,000 house brought in $900 a month rent, I was a buyer. When the house doubled or tripled and the rent went up 25%, I was out, with a happy profit, and invested elsewhere.
I never intended to hit the top of the market.

The ones that bought at 2002-03 prices did pretty well, but only by luck, IMO. 2007 market could have been 2004 instead.

My point is that common sense and economic theory do not hold up when you have so many players in the game that don’t have the same education or experience.

The stock market is the next unlevel playing field.
People are throwing piles of money into funds without understanding what they are doing and the risks, they are sheep following blindly.
They don’t know the difference between P/E, P/S or Market Cap. Some are getting lucky.

When the vast majority of people are in and giddy and happy about a market, I’m pretty much out.
I’ll gladly sacrifice the potential extended gains, so I can sleep at night.

When people are scared, afraid to buy and think that the world is coming to an end, my interest is piqued.

You can get rich in value stocks buying when the news is terrible and it looks like the company is going out of business compared to what you can make when the stock breaks above the 200 day MA, and you are looking for a 25% gain. It may have already moved 200%-500%. It’s not unusual at all, but most people only know to buy the highs, and are scared at the lows.

I’m sure that you know that we may be too conservative for our own good, or at least to want to participate with the sheep.

[HLS]

Nothing is customary, it’s all negotiable.

If you didn’t agree to pay that in any signed up front agreement, I’m willing to bet that if you tell the agent that you aren’t paying it, they will remove it immediately.

I hope that you aren’t using a lender that the agent reccommended.

Do you care to disclose the loan fees that you are being charged ? Did the agent suggest that you ask seller to contribute to closing costs ?
How long did you shop with this agent and did you determine the purchase price or did the agent suggest one ?
How many counter offers were involved ?

There are people on this board that can probably save you $$$ on all aspects of this transaction, or at least give you helpful advice.

[HLS]

Nothing is customary, it’s all negotiable.

If you didn’t agree to pay that in any signed up front agreement, I’m willing to bet that if you tell the agent that you aren’t paying it, they will remove it immediately.

I hope that you aren’t using a lender that the agent reccommended.

Do you care to disclose the loan fees that you are being charged ? Did the agent suggest that you ask seller to contribute to closing costs ?
How long did you shop with this agent and did you determine the purchase price or did the agent suggest one ?
How many counter offers were involved ?

There are people on this board that can probably save you $$$ on all aspects of this transaction, or at least give you helpful advice.

[HLS]

It was huge returns in the eyes of the lenders.
They often leverage 10 to 1.
When 5% was a market rate, getting 7% was 40% more, that’s huge to them, however on risky 2nds, they were getting up to 12%..

Alot of the risk was laid off to average investors, without them understanding the risks. Say that a Wall Street fund manager was given $100 million by investors. With that he could leverage $1 billion in mortgage loans.
He might get paid 2% off the top, so $2 million to start in his pocket.

The returns were then based on $1 billion, until the subprime defaults started.

Subprime bonds were risky to begin with, but Wall Street got VERY creative and carved them into tranches. So there were A rated bonds that were the “best” of the worst.
The rating agencies rated these bonds incorrectly!

Several of these hedge funds were declared worthless a few weeks ago. (Bear Sterns I think) The investors in these funds will probably get zero.

There are individual funds, pension funds and city governments that will be taking losses that they are not aware of yet.
It happened with junk bonds in the 80’s. Funds lose everything because of the leverage.

In the quest for higher returns, risks are taken. The fallout won’t be known for awhile, as they will lag in reporting the bad news as long as possible, and hope to offset with other returns or sweep it under the rug.

They cannot hide the losses forever.

[HLS]

It was huge returns in the eyes of the lenders.
They often leverage 10 to 1.
When 5% was a market rate, getting 7% was 40% more, that’s huge to them, however on risky 2nds, they were getting up to 12%..

Alot of the risk was laid off to average investors, without them understanding the risks. Say that a Wall Street fund manager was given $100 million by investors. With that he could leverage $1 billion in mortgage loans.
He might get paid 2% off the top, so $2 million to start in his pocket.

The returns were then based on $1 billion, until the subprime defaults started.

Subprime bonds were risky to begin with, but Wall Street got VERY creative and carved them into tranches. So there were A rated bonds that were the “best” of the worst.
The rating agencies rated these bonds incorrectly!

Several of these hedge funds were declared worthless a few weeks ago. (Bear Sterns I think) The investors in these funds will probably get zero.

There are individual funds, pension funds and city governments that will be taking losses that they are not aware of yet.
It happened with junk bonds in the 80’s. Funds lose everything because of the leverage.

In the quest for higher returns, risks are taken. The fallout won’t be known for awhile, as they will lag in reporting the bad news as long as possible, and hope to offset with other returns or sweep it under the rug.

They cannot hide the losses forever.

[HLS]

Even if Short Sale is mentioned in a listing, it is a hope & prayer of the agent, so they can earn a commission.
If your landlord hasn’t submitted a hardship package, they are probably wasting their time.

You don’t ask for short sale offers knowing what will be accepted. It’s a poor marketing myth, and I still think that plenty of real estate “pros” don’t know what they are doing. If the agent has been around less than 10 years, they’ve prob never been involved in one.

The next time you see the listing agent, ask them if they have EVER completed a short sale transaction, and ask them how long it took.

The 24 hour offer made Friday has already expired.
Now my bet is that they don’t know what they are doing.
If your landlord isn’t near broke, it isn’t going to happen.
He’s in a bad investment. Not the lender’s fault.

If I were you, I would ask for compensation for being inconvenienced when the property needs to be shown.
Like reduced rent or a cash amount each time.

I negotiated with a bank once on a home that they had foreclosed on. It took over 3 months from start to finish.
They took 3 to 4 weeks to respond to each offer. After my 2nd offer their reply was “we have nothing to discuss”
I loved it!
I bought the house several offers and counters later.

[HLS]

Even if Short Sale is mentioned in a listing, it is a hope & prayer of the agent, so they can earn a commission.
If your landlord hasn’t submitted a hardship package, they are probably wasting their time.

You don’t ask for short sale offers knowing what will be accepted. It’s a poor marketing myth, and I still think that plenty of real estate “pros” don’t know what they are doing. If the agent has been around less than 10 years, they’ve prob never been involved in one.

The next time you see the listing agent, ask them if they have EVER completed a short sale transaction, and ask them how long it took.

The 24 hour offer made Friday has already expired.
Now my bet is that they don’t know what they are doing.
If your landlord isn’t near broke, it isn’t going to happen.
He’s in a bad investment. Not the lender’s fault.

If I were you, I would ask for compensation for being inconvenienced when the property needs to be shown.
Like reduced rent or a cash amount each time.

I negotiated with a bank once on a home that they had foreclosed on. It took over 3 months from start to finish.
They took 3 to 4 weeks to respond to each offer. After my 2nd offer their reply was “we have nothing to discuss”
I loved it!
I bought the house several offers and counters later.

[Author]

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