Saying goodbye to a successful 2013 will be tough but Kandis and I are gearing up for an even better 2014!
There are a few real estate changes taking effect on 1/1/2014 that will impact both Buyers and Sellers so everyone should be aware of them.
The first is with regards to the Federal Housing Administration (FHA) maximum loan amount decreasing from $417,000 to $287,500. The typical FHA borrower might include a first time home buyer, those looking for a down payment as low as 3.5%, buyers with a higher debt/income ratio or anyone with credit challenges. Luckily while this reduction is substantial, $287,000 still buys a lot of house in Southern Nevada considering that the median housing price as of today is only 189,000!
Keep in mind that the home doesn’t have to close by 12/31/13. It just needs to be in contract by that date in order for the loan limit to be up to the previous cap of $417K. The FHA will provide your lender with a “case number” that will follow the transaction to assure that the loan max will be grandfathered. Otherwise these buyers will have to settle with a maximum borrowing amount of $287,500 which could adjust their buying power. I’m advising my sellers to be aware of the change if they’re considering an FHA buyer for their home come the new year. As long as we’re in contract before that 1/1/14 all parties will be fine.
The second change is that the Mortgage Debt Relief Act will not be renewed for 2014. When it was instituted in 2007, it allowed those Sellers in a short sale situation from having to pay income tax on the waived deficiency difference from their loan amount to the selling amount of their home (up to $2,000,000.00). For example if the homeowner owes $300,000 on their loan but short sells it for $180,000 in 2014, that $120,000 difference will now be treated as “1099 income” and will be taxable at the end of the year. We are still able to have the deficiency of the loan waived assuring you that your Mortgage Company will not come after you for the difference!
As a Real Estate Agent who specializes in short sale transactions, I found that the Mortgage Debt Relief Act was a nice feature in the process but by no means dictated the decision of whether or not to short sell one’s home. If there is a financial hardship and you’re unable to make your ongoing Mortgage Payment, a short sale is still one of your best options in avoiding a foreclosure. Just as before I will recommend that you always consult with a CPA about any tax ramifications.
While neither one of these changes will be catastrophic they may impact your future real estate goals or plans. As REALTORS®, we want to position our clients to take advantage of all situations as they present themselves.
Happy Holidays and we’re looking forward to helping you, your friends, family, co-workers, etc. in 2014!