$1,795,000                      SqFt:    1,900

Beautiful Queen Anne Cottage in historical Professorville.
Tucked behind a majestic Magnolia tree in the historic and desirable Professorville area of Palo Alto sits this quaint expression of the Victorian era. Built in 1902, this charming 3 bed, 2 bath Queen Anne cottage is the perfect blend of vintage styling and modern amenities. Designated a Palo Alto Historic Property, this lovely home has undergone extensive renovation and remodeling without sacrificing period details and charm. Features Include: • Inviting covered front porch with period posts, spindles and corbels. • Bay window with period trim; exterior hand-carved appliqués and rosettes. • Gracious living room with marble fireplace and dental crown mouldings. • Separate, elegant dining room with leaded glass windows. • Resurfaced face-nailed honey oak floors and period pocket doors throughout. • Chef’s eat-in kitchen with granite-topped breakfast bar and counters, separate nook. • Tranquil master suite with walk-in closet and luxurious master bath. • Light and bright attic studio with skylight and accessed by spiral staircase. • Original carriage house converted for use as exercise room or home office. • Beautifully landscaped front & rear yards with private brick patio and small pond. Recent upgrades include: new foundation (1996/2004), repaint exterior (2005), front/back sprinklers and drainage system (2005), both bathrooms and master bedroom remodeled (2004), new roof (2002), new water heater (2001), upgraded electrical (1994). ~~~~~~~~~~~~~~~~ • 3 bedrooms and 2 full baths. • Approx. 1900 sq. ft. of living space (per seller) • Approx. 4,144 sq. ft. lot (per county). • Just blocks from University Ave. and downtown Palo Alto

Location:          Google Map

Property Features:

Listing Agent/Office Information:
Ron Kucera (DRE#01374273)
Alain Pinel Realtors
Pref Phone: 650-743-5084,  Email: rkucera@apr.com
Pref Fax: –,  Off Ph: 650-548-1111,  Off Fx: 650-548-1238

This Process may be difficult to believe but it is a definite possibility. As stated below there are hoops to jump through. Banks are willing to allow individuals to assume the loan if they meet the required criteria. This is a system that works because the banks do not want to hold property for one but they also do not want to pay a fee (at times up to $25,000) in order to send the property through the foreclosure process.

Before a lender approves a short sale they will make two key decisions.

First, can the owner afford to continue making the payments on the property? If they can there is no reason for the bank to eat the loss. Banks will not look favorably upon a borrower that they determine lied to get the loan.

Second, will approving the short sale leave the bank in relatively the same position as they are likely to be in by going though the foreclosure process and then selling the property? If the bank can do significantly better by foreclosing they are likely to do so.

The seller must not receive any sale proceeds for themselves.

If there is a junior lienholder, the discounts can be substantial, sometimes as high as 90% or more. Question two is the primary determinant here. If the senior lender forecloses the junior may get nothing so they may take a deep discount to get something out of the property.

Short sale sellers need to be careful because there is no free lunch. The seller may end up with taxable income in the amount of the debt that is forgiven. The seller may also end up with adverse entries in their credit history. Any property owner considering a short sale needs to seek the advice of competent legal and tax advisers before entering into the transaction.

I would advise anyone facing foreclosure to discuss their situation with an experienced Realtor. Short Sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable selling commission so Realtors have an incentive to get involved in Short Sale situations. The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship Letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and the Comps, or comparative home prices supporting the offer. The way mortgages are sold, the mortgage holder can be anywhere and certainly not aware of local real estate conditions. If the package is complete, the Lender will order a BPO, or Broker’s Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company. The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. Yes, there can be tax consequences. The Seller does receive a 1099 on the forgiven part of the mortgage, but there are provisions in the tax code for the offset of the phantom income due to insolvency. Most Short Sellers will satisfy the insolvency requirements or the Lender would not be allowing the Short Sale in the first place. Be aware too that if the home goes to foreclosure, a 1099 is received for the FULL amount of the mortgage, plus late fees, legal fees etc. Obviously every individual situation is different so a CPA or tax attorney should be consulted.

The process does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalized, even if the Lender accepts the first offer. If they do not, the price can be negotiated.

The Short Sale is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don’t want to own and that would negatively impact their ability to make more loans.

For every house we listed on our website, we also provided agent’s information. Please contact with them directly to schedule a appointment.

Thank you and visit us again.

BaoRealEstate.com

 $1,975,000                              SqFt: 2,306

Remarks:
HALF ACRE+ LOT! Open Sat 11/10 noon-5, & Sun 11/11 1:30-4:30. Build your dream home or restore the existing one on a spectacular 24,394 sf lot (per Real Quest). Enjoy the serene setting of the breathtaking backyard overlooking majestic Oak Trees and Adobe Creek. A peaceful and secluded location, yet only blocks to downtown. Excellent Los Altos Schools!!

Location:

Google maps

Open House Info: 
11/10/2007  1:30PM To 4:30PM 
11/11/2007  1:30PM To 4:30PM 

Listing Agent/Office Information:
Owen Halliday (DRE#01453658)
Coldwell Banker-PA Downtown  Pref Phone: 650-492-0062,  Email: owen.halliday@cbnorcal.com
Pref Fax: –,  Off Ph: 650-325-6161,  www.owenhalliday.com,  Off Fx: 650-322-3606
 

$1,795,000                              SqFt: 2,411 

Well-maintained 4B/3Ba home offers a light & spacious living room with abundant windows over looking the beautiful backyard, separate dining room & open kitchen/family room with hardwood floors.
Newly painted inside and out, this well-maintained 4-bedroom, 3-bathroom home offers a light and spacious formal living room with abundant windows over looking the beautiful backyard, separate dining room, and open kitchen/family room with hardwood floors. Close proximity to downtown and highly desirable Los Altos Schools.

Location:

Google map

Open House Info: 
11/10/2007  1:30PM To 4:30PM 
11/11/2007  1:30PM To 4:30PM 

Listing Agent/Office Information:
Kathy Bridgman (DRE#01189798)
Alain Pinel Realtors  Pref Phone: 650-209-1589,  Email: kbridgma@apr.com
Pref Fax: –,  Off Ph: 650-941-1111,  http://www.kathybridgman.com,  Off Fx: 650-941-1411 

“Especially if they’re in foreclosure, talking with a lender can be intimidating,” says Julie Gugin, executive director with the Minnesota Home Ownership Center, a St. Paul-based nonprofit organization that provides education and counseling on homeownership to Minnesotans with low and moderate incomes.

Fortunately, a number of organizations around the country provide free counseling and education to individuals who are having trouble making their mortgage payments.

Often, it’s easier for individuals to contact a counseling agency than it is to contact the bank that holds their mortgage. For one thing, it is becoming increasingly difficult to determine just which financial institution holds a particular mortgage loan, says William Bailey, professor of family economics at the University of Arkansas. “Most mortgages are bundled and sold to secondary investment groups.” Even once homeowners identify the right financial institution, there is no guarantee that it will have a local representative near the homeowner, Bailey says.

In addition, homeowners often worry that the lender will be uninterested in helping them, says John Snyder, homeownership specialist with NeighborWorks America in Washington, D.C., a nonprofit network of about 230 agencies across the country that provides training and financial support to promote homeownership. Borrowers facing foreclosure typically are frightened, and most counselors have a softer approach than bankers. As neutral outsiders, the counselors also can calm fears and help homeowners clearly and logically assess their situation and options.

Many counselors also help borrowers address the underlying issues that are keeping them from being able to make payments on time. For instance, counselors often can provide employment training and resources for homeowners who are unemployed.

When it comes time to contact the financial institution, counselors at these agencies often have the phone numbers and names borrowers need to expedite communication with their lender. “Counselors can get direct lines to the servicers,” Snyder says, adding that the counselors are continually expanding the network of financial institutions with which they work.

Finally, some agencies offer their services in languages other than English in order to better serve homeowners who speak English as a second language.

Many organizations around the country provide information on foreclosure, as well as counseling for homeowners who may be facing foreclosure. Here are descriptions of several such agencies:

HomeLoanLearningCenter.com: Operated by the Mortgage Bankers Association, the Web site can be viewed in either English or Spanish and includes a Foreclosure Prevention Resource Center. It outlines the information on foreclosure and on working with a lender, as well as a glossary of mortgage and foreclosure terms.

Housing Help Now: HousingHelpNow.org is an offshoot of the National Foundation for Credit Counseling. “We want to assist consumers in a proactive way,” says spokesman Nick Jacobs. The Web site provides housing information and consumers can take the Mortgage Reality Check. By answering such questions as “Do you owe more on your mortgage than it is now worth?” test-takers gain an understanding of how well their mortgage fits their budget and income. The site also identifies steps homeowners can take if they are behind on their mortgage payments.

LULAC Home Buyer Center Programs: LULAC, or the League of United Latin American Citizens, formed the LULAC National Housing Commission several years ago, says Lynn Jaime, director of home counseling with the Dallas-based organization. The LULAC National Housing Commission operates Home Buyer Center Programs in Chicago, Dallas, Phoenix and San Antonio, with several additional centers in the planning stages. Counselors at the centers host seminars on a number of topics, including foreclosure prevention. They’ll review assistance options, provide tips on communicating with lenders, and review foreclosure laws, among other things. Many classes are offered in English and Spanish.

Counselors also may work with homeowners and their lenders to develop a payment plan, among other things. While the majority of the commission’s clients are Hispanic, counselors work with people of all ethnicities.

Legal Aid: The many Legal Aid offices around the country provide legal representation for individuals and families who can’t afford to hire their own attorneys. Most of its clients are at or below the poverty line, says George Castrataro, managing attorney in the Broward County, Fla., Legal Aid office. He estimates that between 60 percent and 80 percent of homeowners facing foreclosure fit into this category.

Attorneys working with Legal Aid can help homeowners facing foreclosure in several ways, Castrataro says. For example, some borrowers may be in foreclosure trouble due to a disability that prevents them from working. Legal Aid can help them make sure they get any disability payments due them. If foreclosure is inevitable, Legal Aid attorneys can tell them what to expect. Many Legal Aid offices around the country have their own Web sites; just do a Web search for “legal aid” to find one in your area.

NeighborWorks America: NeighborWorks America is a network of 238 organizations across the United States that provides counseling and education to help homeowners work their way to financial solvency. Counselors also may contact lenders to help develop a payment plan, among other things, Snyder says.

Don’t wait until it’s too late
Although these organizations provide a tremendous amount of information, they are a first step. There’s no getting around the fact that a call or visit to a lender typically is needed, Jacobs says. That’s particularly the case if the individual would like to restructure the payment schedule.

What’s more, avoiding foreclosure may require significant lifestyle changes. An individual may have to develop and stick to a more modest budget. In extreme cases, counselors may recommend a move to more affordable living arrangements.

It’s always best that borrowers reach out to a counselor or organization before their troubles have reached a crisis point. “There are more tools available if you’re 60 days behind, versus if there’s a sheriff’s sale next week,” says Gugin. For instance, the lender may consider a change in the payment plan or allow the borrower to defer several payments.

Better advice for consumers is to know what you can afford and how different mortgages work before taking on responsibility for one, says Snyder. Most agencies are striving to offer education to prospective homebuyers before they get a mortgage.

“We strongly believe that education helps borrowers,” Snyder adds.

Day 1
It’s the first of the month, and the mortgage payment is due. The borrower misses the payment.

Day 16 to day 30
A late charge is assessed on payment.

The company that processes the borrower’s payments (called the mortgage servicer) starts attempting to make contact to find out what happened.

Day 45 to day 60
The servicer sends a “demand” or “breach” letter to the borrower pointing out that terms of the mortgage have been violated.

The borrower is given 30 days to resolve the situation by paying the delinquent amount.

Day 90 to day 105
The servicer refers the loan to its foreclosure department and hires a local attorney or other firm to initiate foreclosure proceedings.

Depending on the state where the home is located, the servicer’s representative may record a formal notice of foreclosure at the local courthouse, publish details of the debt in the local newspaper, attend hearings on the case and make appropriate court filings.

Day 150 to day 415
The house is sold at a foreclosure sale or auction. The wide time range is due to different state requirements.

Borrowers in states with judicial foreclosures, or those in which lenders have to retake property titles via the court system, can get almost a year to straighten out their affairs before the sale. Those in nonjudicial states have as little as two months.

Day 150 to day 415 and on
After the sale, some states grant borrowers a “redemption period” in which they can still repurchase the property if they have the money. Others force consumers out immediately following the auction.

$1,695,000 SqFt: 2,652

Remarks:
Huge price reduction 10/8/07. Expansive single-level open floor plan allows for large gatherings and an easy flow onto a large deck. Eat-in kitchen, large rooms, new paint and carpet. Close to desirable downtown.

Location:

Google map

Property Features:

Listing Agent/Office Information:
Dorothy Gurwith (DRE#01248679)
Coldwell Banker-PA Downtown
Pref Phone: 650-752-0724, Email: –
Pref Fax: –, Off Ph: 650-325-6161, , Off Fx: 650-322-3606
Off Email: — www.camoves.com

Let’s assume the example homeowner mentioned earlier has nonrecourse mortgage debt of $110,000 and an adjusted basis of $20,000 in the home, which has a fair market value of $100,000. The owner has no ordinary tax liability for that $10,000 difference in his debt and the home’s value. But when a nonrecourse mortgage is foreclosed and that debt is greater than the home’s value, the property is treated for tax purposes as if it were sold for the balance of the mortgage.

That means this homeowner would have a $90,000 difference between the mortgage debt and his basis ($110,000 less $20,000) and that $90,000 is taxable capital gain from the “sale or other disposition” of the home. So even though the foreclosed-upon owner didn’t get any cash from the transaction, he still owes taxes on what is known as phantom income. The only good news is that the taxes are collected at the lower 15 percent (or 5 percent for lower-income taxpayers) capital gains rate.

If that same homeowner’s mortgage was recourse debt and his lender canceled the $10,000 difference between the outstanding loan and the home’s fair market value, the foreclosed-upon owner would owe higher, ordinary taxes on that forgiven 10 grand. In addition, his capital gains bill would be based on $80,000 — the property’s fair market value of $100,000, less his $20,000 adjusted basis.

For some struggling homeowners, the taxes on forgiven debt or phantom income are all too real.

“If it’s $10,000, that’s a relatively small spread; $2,000 to $2,500 in federal and state taxes,” says Lanzaro. “But it’s not just the working man having this problem. Everybody’s getting in over their head these days.

“If you have a $700,000 mortgage and the bank can only get $500,000 in a foreclosure sale, now you’re talking about some tax liability.”

And don’t think the IRS won’t find out. The agency has a mechanism to catch foreclosure sales. The lender is supposed to issue a 1099-C to alert the former homeowner and IRS of the canceled debt, and, in certain cases, a 1099-A showing the information you need to figure your gain or loss.

“Some people are moving and the 1099 has trouble catching up,” says Gary Garwitz, tax partner with BKD LLP in Springfield, Mo. “If you’re in that situation and had a mortgage you didn’t pay off, make sure you get that 1099.”

The IRS definitely will get its copy and expect the associated taxes. If they’re not paid, penalties and interest will be added.

Home-sale exclusion opportunity
There is one bit of good news for our hypothetical homeowner and others dealing with foreclosure-induced taxes. You can get out from under at least part of the IRS bill if you meet the homeownership tax-exclusion rules.

This popular tax break allows a single homeowner who sells his property under more favorable circumstances to exclude up to $250,000 profit from taxes; the exclusion is $500,000 for married couples filing jointly.

The exclusion also applies in foreclosures. As long as the seller, in this case the foreclosed-upon owner, lived in the home as his principal residence for two of the last five years, he also can avoid taxes on any capital gain profit, phantom or real.

Bankruptcy and insolvency solutions
Two other circumstances offer tax relief in foreclosures, but both could cause other financial problems.

If a homeowner can show he’s insolvent before the discharge of the mortgage and turnover of the property, as well as afterward, any proceeds are not taxed. However, says Trenholm, “insolvency is a little tricky. There’s no strict definition of what assets (go in the calculation), but for the most part, a lot of people caught in the real estate crunch can establish that condition.”

The other option is bankruptcy.

“Forgiveness debts, in these cases, are not taxed,” says Roth. “They don’t want the bank chasing them down, which is why many times people going through foreclosure also go through bankruptcy.”

However, filing for bankruptcy has its own set of considerations. “New bankruptcy rules don’t give (filers) a lot of relief,” says William S. Bost, a member of the Raleigh, N.C.-based law firm Ragsdale Liggett PLLC. “If you have a job and are making money, the new bankruptcy rules don’t give you a whole lot of help. It gives you some time, but I don’t think that’s necessarily the way to go.

“It used to be like going to church, you walk in and walk out absolved, but it’s not like that anymore,” says Bost. “Now, it’s not worth the pain you pay the rest of your life.”

One thing lending and tax experts all agree on: If you’re facing foreclosure, take action as soon as you realize you’re in trouble. And get professional help to determine exactly what your personal tax liability might be in the transaction.

Lanzaro has two other recommendations: “The best advice is, don’t buy a house you can’t afford and don’t get an adjustable-rate mortgage.”

Other options
If you’re stuck with more house than you can pay for, there are a couple of options in addition to foreclosure. Either is likely to reduce the stress of this terrible time and probably will do a little less damage to your credit report.

Each, however, still has tax and other potential long-term financial implications.

Short sale: This real-estate transaction has become popular among homeowners who are having problems making payments on a mortgage that is more than their house is worth. Rather than waiting for the bank to foreclose, the owner works with the lender to complete a sale of the home for less than the loan balance.

“You have a property you’re just trying to get out from under,” says Paul Haarman, vice president of Renaissance Mortgage in Salem, N.H. “Everybody is all lined up at the table and the buyer buys the property and the lender agrees to the price. You have a $250,000 debt, the bank nets only $220,000 and that $30,000 is written as a foreclosure shortage.”

A short sale keeps a foreclosure from showing up in your credit record, but the shortfall will appear there as a delinquent loan. It’s not as bad as a foreclosure, but, says Bost, “It’s on the credit report and, as a (future) borrower and consumer, it will haunt you.”

Deed-in-lieu of foreclosure: In this case, says Trenholm, the homeowner basically says to the lender, “I want to save you some time, some money. How about I just turn over the property?”

This way the foreclosure process is avoided, which will help the borrower, because it won’t show up on a credit record. However, it could still show up on a credit report as forgiven debt.

This process has “pretty much the same tax consequences as a foreclosure,” says Trenholm. Because you are being relieved of the indebtedness on the property, for tax purposes it’s still considered sale of the property.

“All it does is make it a little bit easier to go through the process,” he says.

Tax liabilities remain
The argument for short sales and deeds-in-lieu is that they are beneficial to strapped borrowers. From a tax and financial perspective, however, they don’t really matter.

“All of these situations are basically the same,” says Stein. “The mechanics and timing may be a little different, but essentially in all of them at some point a lender is saying to the borrower you don’t have to pay the rest of what you owe. When he tells the borrower that, that’s cancellation of indebtedness income.”

“The only benefit,” says Bost, “is the ‘It’s over’ factor.”

“You can walk away from the big house payment, but not from the potential tax implications,” says John W. Roth, senior tax analyst at CCH in Riverwoods, Ill. “And if you couldn’t afford the mortgage, you probably can’t afford the taxes.”

As the lending crisis continues to shake out, more homeowners, particularly those who used creative mortgages to buy their houses, could be in this predicament. Even long-time homeowners who refinanced their properties based on increased value when the real estate market was hot could find themselves in tax trouble if they lose their properties to the bank.

The issue is complicated by many factors. There are, of course, the financial problems that have led to the foreclosure process. Add to that the loan terms (some of which employed those creative mortgage products), the housing market in your area and, of course, federal tax laws, and you’ve got a recipe for financial disaster.

Forgiven but not forgotten
In many cases, the tax problem associated with a foreclosure arises from a seemingly benevolent move — the lender forgives some of the loan. This happens when a lender and a borrower negotiate a reduction in the loan amount. It also happens when the lender forecloses on the property and sells it for less than the outstanding mortgage.

In both instances, the difference for which the borrower is no longer responsible is usually considered cancellation of debt, or COD income. It also is called discharge of indebtedness income or discharge of debt. Regardless of the name, under the tax code, it’s all taxable income. The tax on COD is calculated at ordinary rates, which range from 10 percent to 35 percent depending upon your income.

“What the tax law essentially does is treat the foreclosure as a sale by the debtor, the owner of the property, with the proceeds being paid to the lender,” says Frederick M. Stein, RIA senior analyst from Thomson Tax & Accounting. “And any debt owed above and beyond those proceeds is cancellation of indebtedness income.”

That’s why financially struggling homeowners who are considering turning over the house keys to the bank should think twice. While sending the lender “jingle mail,” a term coined to describe the sound of a key-containing envelope, will get you out from under the burden of the monthly house payment, it won’t prevent a tax bill in your mailbox.

“People who advise you to walk away talk about payment consequences, not the tax consequences,” says Stein. “If they owe $50,000 and $10,000 is forgiven, they think of it as a gift. It may be a gift from the lender, but not from the IRS.”

Roth adds, “The IRS is far more tenacious than most banks. Their responsibility is to collect the tax on the income you have.”

The type of mortgage matters
Just how much and what type of tax the IRS expects after a foreclosure depends in large part on whether the loan is of the recourse or nonrecourse variety.

With a recourse loan, the debtor is personally liable for the debt. In a foreclosure, it means if the property sale proceeds are not enough to cover the outstanding mortgage, the debtor must pay the difference. This includes interest that accrues during the foreclosure process.

A nonrecourse debt, however, is secured by the loan collateral. If money from sale of the property doesn’t cover the outstanding debt, the lender has no legal ability to get the additional funds from the debtor.

“In nonrecourse situations, you have a house, the mortgage and the market value of whatever the bank can sell it for and put toward the outstanding loan,” says Ted Lanzaro, CPA and owner of his own accounting firm in Shelton, Conn. “If the house is worth $100,000 and there is a $110,000 loan on it, the bank in a nonrecourse situation cannot go after the borrower for that $10,000 difference.”

Cancellation of debt income and its tax implications typically come into play with recourse loans. If the house’s fair market sales price is less than the unpaid mortgage and the lender forgives the remaining mortgage debt, that amount is taxable income at ordinary tax rates.

With either type of mortgage, a foreclosed-upon homeowner could end up owing capital gains taxes without ever receiving any money from the foreclosure sale.

A sale is a sale is a sale
“Foreclosure is not a sale in normal terms, but it is still treated under tax code as a sale,” says Stephen Trenholm, CPA and tax manager at Rucci Bardaro & Barrett in Boston.

“The outstanding balance of the mortgage is compared to the basis in house. If that produces a gain, it’s a taxable gain. If it’s a nonrecourse mortgage, it’s a capital gain.”

That’s right. Even though you aren’t selling the house and the bank is, the IRS views the transaction as if you were the seller. That means you could owe taxes on the sale. The bad news comes directly from the IRS, via Publication 544:

“If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. This is true even if you voluntarily return the property to the lender. … You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized.”

Those calculations also take into consideration any cancellation of debt income and the type of mortgage.