Aloha!

Thank you for stopping by!  I hope to feature both real estate and lifestyle information regarding living on this wonderful island, particularly on the Windward Side.  

The towns of Kailua, Kaneohe and Waimanalo all have their own personalities.  Hopefully, you get a chance to immerse yourself in all they and the island of Oahu have to offer! 

There is so much to do, see and experience!  My hope is to give you a little taste here.  Please read on...

Thank you ~ Jill

Jan. 20, 2023

Owning A Home On O'ahu: The Lees' Story

Are you a renter in Hawaii and you're looking to get into the real estate market or buy your first home? In this episode of Aloha O'ahu, I’m going to share how my clients, the Lees, were able to buy their own single-family home. We’ll learn about the steps they took to make it happen and how you can buy a home, too.

 

 

Meet The Lees

It's not an automatic move to get into your forever home. Rather, it takes a series of steps to get to the goal of owning your own property. And if you think you are meant to rent forever, you may not after watching this video.

One of the best things I get to do is to watch buyers invest in themselves and their future by investing in property. It is a way to build wealth by building equity in your property. I want to share with you the story of the Lees so that you can see how you can get into your own property.

Today, the Lees own their own single-family home in Makakilo. They are thrilled to have the space that they need for their family in a location that they love. However, prior to owning their own home, the Lees faced a challenge.

Overcoming Obstacles

The Lees’ challenge was the fact they were a “normal” dual-working couple who wanted to purchase their own home on Oahu. So where did they start? Did they start in their single-family home? No, they did not. Being a renter means that you are paying someone else's mortgage, so it's hard to put money away.

Still, you have to start somewhere! Mr. Lee started putting money away little by little. He knew that to get a conventional loan he'd probably need 10% down for his first purchase, so he started saving. Mr. Lee knew that he could not start with a single-family home, but he understood his starter home would probably be a condo.

He saved about $40,000 over time and bought a condo for a little bit less than $400,000 in June 2019. Over the next year and a half, Mr. Lee continually made his payments and started building equity in his condo. In addition, the value of his condo went up over 25% in two years.

Taking The Next Step

The Lees had a child and hoped for more space, so they decided to put their condo up for sale—and it sold for $510,000. Before they listed, I advised them that to buy again, they were going to have to sell their condominium and rent somewhere else temporarily. That way, they could go shopping with cash in hand.

In the interim, they rented a condo in Town until their dream home in their dream neighborhood became available. When that home came on the market, they were able to make an immediate offer with a significant downpayment.

By buying their condo first and letting it appreciate, they were eventually able to buy a single-family home in the Kapolei area. They did not go from renting straight into single-family home ownership. They took the intermediary step of buying that condo and letting that condo appreciate so that they had the funds to buy their single-family home.

From Renter To Homeowner

The main thing here was that my client was able to go from renter to condo owner to single-family homeowner. The process was taking one step at a time, and they took my advice on how to move forward during each step.

Renting in Town was not easy or fun for them, but it is what they needed to do to put themselves in the best position to buy that home. We had quite a few challenges along the way during this transaction. However, with communication, teamwork, and negotiation, it all worked out.

The next time someone tells you you can't be a homeowner, please know that it's still possible. There are special loans and first-time homebuyer programs out there that can help you achieve the goal of getting your own place. While your first property may be a condominium, a few years later you can buy a home.

I’m Here To Help

Remember, you have to start somewhere, just like the Lees. That's exactly what we did. My husband and I started by buying a condo in Kaneohe and eventually moved our way to a single-family home in Kailua.

Just like the Lees and just like me, you could do it, too! It just takes long-term planning—and I'm here to help you with that. If you find yourself or if you know of someone in a similar situation who I can help, please reach out and let me know. I’ll be happy to help however I can.

Don’t forget to subscribe to my channel so you never miss an episode of Aloha O'ahu, my show all about living here on this beautiful island. Stay tuned to see what I feature next!

Posted in Real Estate Tips
Jan. 8, 2023

All About Assumable VA Loans

Are you eligible for a VA loan and are about to buy or sell a property? In this episode of Aloha O'ahu, I’m going to talk all about assumable VA loans. We’ll look at what it means to assume a loan and why this is a great option for both buyers and sellers.

Assuming VA Loans

We haven't talked about assuming VA mortgages in several years, mainly because the interest rates were so low. However, it's time to talk about VA assumption, whether you're going to be the seller or the buyer.

What does it mean to assume a loan? A buyer assumes a seller's mortgage when the buyer purchases a home and takes over the mortgage of the seller. Essentially, it's a transfer of the loan from the seller to the buyer.

Why would a seller care about a buyer assuming their VA loan? Because it is a great marketing tool for a VA seller to be able to tell a buyer that they can assume their loan—especially if today's mortgage rates are much higher than when the seller originally purchased the property.

Interest Rate Advantages

Let's say a current VA seller locked in their interest rate in August of 2020 at 3%. That was around the time of the lowest interest rates in history. If you are looking to buy when the rates are at 6%, 3% sounds pretty attractive.

The seller can advertise their property for sale and market it by saying that the buyer can assume their 3% loan. That's an attractive offer to buy a home at $800,000 at 0% down. The payment at a 6% interest rate is approximately $4,800. To buy the same home at an $800,000 price point with 0% down at the assumable 3% rate would cost you approximately $3,400. That's a big difference.

Eligibility

Buyers would prefer to buy a home with an assumable mortgage so they can take over that loan with a lot lower interest rate. If you are a VA buyer, you can assume that VA mortgage from the seller and agree to give the VA seller back their eligibility. They can then, in turn, go back and use their benefit on their next purchase.

If you are not a VA buyer, that VA seller would have to tie up their eligibility with you. They would not be able to use their entitlement benefit for as long as you, the buyer, were paying off that mortgage. Using that $800,000 price point as our example, a buyer should note that the seller only has $650,000 left on their mortgage to pay.

When the buyer assumes their mortgage, they will then have to go out and get a second loan for $150,000 to make up that difference. Regardless, having the great majority of your mortgage at that 3% interest rate is a nice perk.

I’m Here To Help

Like most other topics, I can only cover the basics in this video. If you are a VA seller or a VA buyer, let's connect so I can provide you with more information. We will bring our lender into the conversation, as they are the experts in loans. They can help us determine whether your loan is assumable as a seller, or if you're qualified as a buyer.

As with all things, preparation and knowledge are keys to a smooth transaction. Let's get you prepared to sell or buy your home. If you liked this video and would like to receive notifications of new episodes, make sure you subscribe to this channel so you never miss an episode of Aloha O'ahu.

Remember, I help people both relocate and move on the island. If you have any additional questions or need assistance, please don't hesitate to ask!

Posted in Real Estate Tips
Jan. 2, 2023

What Seller Documents YOU Need Before Selling Your Home

Are you going to sell your property and you're wondering which documents are going to be important? In this episode of Aloha O'ahu, we’re going to talk about two specific documents you're going to want to have in hand in advance of selling your home. We’ll learn about everything from the acronym “SRPD” to what a prelim is so you’re best prepared for the selling process.

The SRPD

The SRPD is an acronym that stands for “Sellers Real Property Disclosure.” It is a five-plus page document in which the sellers tell the buyer any material facts they know about the property. It’s also required by law.

The sellers disclose everything from general disclosures—like whether a property is in a flood zone—to the utilities and services that are available and their general costs. It will also disclose if the property is part of an association and any improvements that have been made to the property.

Disclosing Property Issues

Often, the “meatiest” section of the SRPD is the defects, repairs, and replacement section of the report. It is here that sellers need to tell the buyers about past and present issues with the property. These include the appliances, foundation, windows and everything in between.

If you replace the refrigerator, great; write that down. If there was a plumbing leak in your kitchen and you had to have that fixed and the cabinet replaced, include that. This is the place where you let the buyer know every little thing you know about the property so that they are informed and it does not come back to bite you later. My advice is to disclose, disclose, disclose everything.

The Preliminary Title Report

Now that we've talked about the SRPD, let's talk about another document I think you should have: the preliminary title report. The good news is that as a seller, there's no form to complete for this. As your Realtor, I will request this document from the title and escrow company.

The preliminary title report—or prelim for short—contains a lot of specific information about the property. The preliminary title report will give you information such as the property's legal description and the history of the property documents that have been filed up to that point. It can describe any easements or access to the property and the terms under which a title policy will be issued.

When I get a copy of a title report, the first thing I look at is how much the seller owes on the property and if there are any liens. I also check for any encroachments on record and, if so, whether there are any encroachment agreements. It will also contain hyperlinks to other relevant documents.

A Smooth Transaction

Why do I advise my clients to have these two documents and other documents in line before we list? As soon as I know that a seller is going to list their house, I start pulling about a dozen or so documents and start compiling information. This is because I do not like real estate surprises!

I want my sellers to be able to go through this process as smoothly as possible. We want to know if any issues need to be resolved—and as many as possible—before we actually go on the market. Neither the buyer nor the seller wants to be in the middle of a transaction and find out that the property cannot be closed on for some reason or another, so it's important to take care of any issues in advance.

I’m Here To Help

I come from the perspective of helping my sellers have the smoothest transaction possible. Part of that is getting our ducks in a row early. So if you have specific questions about getting your home ready to go on the market, please feel free to reach out and ask.

Don't forget to subscribe to my channel so you never miss an episode of Aloha O'ahu, where I share information on everything O'ahu real estate. Stay tuned to see what I feature next!

 

Posted in Real Estate Tips
Dec. 12, 2022

All About Real Estate Trusts

Are you wondering what happens if your loved one has a property in a trust? In this episode of Aloha O'ahu, we’re going to talk all about real estate trusts. We’ll find out what a trust is, if you should get one for your own assets, and what happens if a family member has one.

 

 

What Is A Trust?

First, let’s look at what a real estate trust is. A trust is a fiduciary arrangement that allows a third party or trustee to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways; they specify exactly how and when assets pass to beneficiaries.

To keep it simple, it's a document that states who gets what. The trustee controls the trust for the beneficiaries. Beneficiares are the people who are going to receive the assets in that trust. An example would be a mother, who is the grantor or trustee, for the two beneficiaries who are her children.

How It Works

Let's just say that trust contains a house, some family jewelry, and bank accounts. In the beginning, Mom controls her own trust. However, upon her passing, Auntie Donna takes over. Now Auntie Donna is going to be the one who distributes the assets in that trust on behalf of Mom.

Everything and everyone is defined within the trust. This way, we know who is giving away the assets and who is receiving them. The wishes of the trust maker are put in writing so that their wishes are fulfilled and binding.

Why A Trust Is Important

Why would you ever want a trust? The last thing you ever want to do is have your loved one’s assets go into probate. A trust allows the assets to go to the beneficiaries without having to go through court. If you have to go through probate and the assets go to a court to distribute, you are likely going to have to pay attorneys fees, court fees, and additional taxes.

Many people think that a will is enough protection, but many times it is not. There are benefits to having assets like real estate in a trust. Let's talk about a few.

The Benefits

The first one is the speed of distribution. The beneficiaries are going to receive their inheritance much faster than if it has to go through a probate proceeding. Second, there could be fewer taxes to pay with a trust if the trust is drawn up correctly. The third aspect is control.

The trustee can control who gets what and when. Some examples of this control are that the trustee can say that grandchildren get money towards their college tuition, or they can also stipulate that one of their children does not take any of the inheritance until they turn 25. The other aspect of control is the trustee can control who doesn't take from the trust or how often a person can take from the trust.

Let's say you have a daughter who squandered money in the past. Maybe you state in your trust that she gets paid a certain sum every year versus one lump sum. Or, in the case of a divorce, maybe your child’s spouse gets nothing. Another aspect is you have much more privacy with a trust. In this case, distribution is going to be private and not subject to court proceedings and costs.

If A Loved One Passes

In terms of real estate, what happens if a loved one passes and their home is in a trust? If your loved one passes, and that property is in a trust, it's usually a good thing if you are one of the named beneficiaries. As I mentioned earlier, once a property goes into probate, it could be months or a year before the matter is settled in court.

When a property is held in trust, we can move forward with that sale if that is the wish of the trustee. The trustee can determine the terms of the sale, and the property can actually be closed. The money then goes into a named bank account for the trust.

The proceeds from that sale can go into that trust bank account and the proceeds can be distributed to the beneficiaries of the trust. Sometimes, one family member can buy out the other beneficiaries, and that property can stay in the family.

I’m Here To Help

A trust allows for very clear instructions as to what happens to all of the assets in that trust—including real estate. I have assisted with trust sales in the past and can certainly help you as well. However, if you have specific questions about trusts, wills, and probate, please let me know so I can recommend an attorney for you to discuss your particular issues.

If you liked this video and want to see more about living on O'ahu, please subscribe to my channel so you never miss an episode of my show. Stay tuned to see what I feature next!

Posted in Real Estate Tips
Dec. 8, 2022

Should You Choose A VA Loan Or Conventional Loan?

Are you thinking about buying a house using a VA loan, but you’re weighing the pros and cons versus a conventional loan? In this episode of Aloha O'ahu, I’m going to break down some of the differences between choosing a VA loan and a conventional loan. We’ll look at the qualifications and advantages of each so you can make the right decision for your situation.

Before we look at the differences between these two loans, please note that I am not a lender. However, I'm happy to refer you to one to discuss your specific circumstances. I speak to my clients about getting loans, in general, so they can make an educated decision about what will get their offer accepted and what will be best for them.

 

Choosing Your Loan

Buying a house can be confusing, especially when it comes to your financing and determining what kind of loan is the smart choice for you. The major difference between these two loans is that a VA loan is strictly meant for veterans, whereas a conventional loan is open to anyone who qualifies.

If you're a veteran, first of all, thank you for your service. Second, please don't let anyone tell you that a VA loan is a bad product. It's actually one of the best to use in most cases. However, we have to remember that not everyone qualifies for a VA loan. Additionally, VA loans don't apply to all properties.

A conventional loan typically offers the best terms and is best used for borrowers who have a minimum downpayment of 3.5%. However, many borrowers put as much as 10 to 20% down. Remember, the more you can put down, the lower your monthly payment will be. Additionally, closing costs are lower and the rate tends to be competitive.

Conventional loans tend to work best for borrowers with good credit who can put upwards of 5% down. Sellers like accepting offers that are based on conventional loans because they believe that they will close more smoothly.

Who Qualifies

Now let's talk about VA loans. If you're looking up information on VA loans, chances are you're affiliated with the military and may qualify for one. If you have questions about your specific situation, I'm happy to connect you with a lender.

Generally speaking, you will qualify for a VA loan if you serve 90 consecutive days of active duty during wartime or 180 days during peacetime. You’ll also qualify if you served six years in the National Guard or if you’re the spouse of a service member who passed away while serving or suffers from a service-related disability.

There are other cases than the ones I just listed, so always ask a lender if you think you may be eligible.

Rates And Loan Limits

When it comes to rates, VA loans are some of the most competitive rates around. They are also often less than a 30-year conventional loan. Additionally, the credit standards to receive a guaranteed VA loan can be more lax than conventional loans.

As of January 1, 2020, VA loans now have no cap or limit to the amount of money that a vet can borrow. If the VA lender is willing to underwrite such a loan, the VA will insure it. Please remember that every case is different; your lender can speak to you about your specific case.

This Versus That

Let's play a quick game of this-versus-that between VA loans and conventional loans. A VA loan requires no down payment by the lender, whereas a conventional loan needs a certain percentage of the purchase price down. Please keep in mind that with your VA loan, your realtor may advise you that a deposit—even a small one—may be required in the eyes of the seller.

When you're using a VA loan, you must use it for your primary residence. This means you have to live in it. With a conventional loan, you can live in the property, use it for a secondary residence, or even use it for an investment property.

With a VA loan, there is no formal credit score limit or debt-to-income ratio; it will be up to the lender who services a VA loan. With a conventional loan, however, there are firmer limits on your credit score and DTI. There is one twist with VA loans: you will pay for closing costs and the VA funding fee. Alternatively, with conventional loans, you'll only pay closing costs. Please note that the VA funding fee is normally rolled into your monthly mortgage payment.

Which Loan Is Best?

In most cases, VA loans are the way to go. Due to the overwhelming number of pros, we have used my husband's VA eligibility several times. I have enjoyed using the benefit myself. Of course, in some cases, a conventional loan may be the right choice for you, even if you qualify for a VA loan.

Some examples include if the veteran already has their VA eligibility tied up in another property or if they have a generous amount of funds for a downpayment, making the overall costs less by avoiding that VA funding fee. It also could apply if they want more equity in their home right away.

Additionally, in some cases, you cannot use VA loans on certain types of properties. This includes some condominium buildings that have not been approved by the VA, or if the property is not up to VA appraisal standards.

I’m Here To Help

I hope this video answered some of your questions regarding the differences between a VA loan and a conventional loan. Whether you decide to use either loan, it’s never too early to begin getting your financing in line. The truth is the more you prepare in advance, the less stressful it's going to be in the long run.

Regardless of what kind of property you will be purchasing, you will need to decide how to best finance it. Knowing which loan is the most beneficial is the most important part. If you have any additional questions, always feel free to reach out to me and I’ll be happy to help.

Don’t forget to subscribe to my channel so you never miss an episode of Aloha O'ahu, my channel where we discuss living in Hawaii. Stay tuned to see what I feature next!

Posted in Real Estate Tips
Nov. 18, 2022

What Is A Short Sale??

I’m going to explain how to sell your house for less than you owe to avoid foreclosure. I’ll show you how a short sale can allow you to walk away without filing for bankruptcy and with lender forgiveness. So rather than foreclosing, you have two options you can try it first.

Firsts Step

The first step is always to talk to your lender about what options you have for your Oahu property. They may be able to work out different payment options for you before short sales or foreclosures are even part of the discussion. If you are in arrears and cannot work something out with the lender, your next option is to short-sale your property.

What is a short sale?

A short sale occurs when the bank or lender accepts less than what you owe on your property. And the truth is that most times the bank would rather receive the proceeds from a short sale versus going into foreclosure because they lose a lot more money doing that. 

 

 

First, you'll avoid that foreclosure from showing up on your credit. Once it appears on your credit, it's extremely damaging, it will likely affect your ability to rent, apply for a credit card, or buy again in the future. A short sale on your credit report is much preferred to a foreclosure. A foreclosure on your credit is much like filing for bankruptcy. Also, once your house goes into foreclosure, there is no guarantee that the bank won't come after you for your past-due payments. This is called a deficiency judgment.

 

Deficeincy 

Judgments to give you an idea of what you can expect a lender to require in terms of repayment. When you instead opt for a short sale, you remain in control of the situation. The bank owns the note attached to the title of your property. They dictate what they're willing to accept based on the amount of the debt owed. You are the owner of the record on the property and the one who can accept, reject, entertain or respond to the offers on your property. Once an offer is accepted and then approved by the lender, the transaction proceeds and the realtor is in communication with the lender to get that sale to the closing table. If all goes well, the property is closed  and you the seller will no longer have an obligation. You will sign a form saying that you short-saled your property and often the bank does not attempt to collect any further funds from you. Please know that the lender can forgive the balance or they can try to pursue a deficiency judgment in some cases. They will continue to communicate with you the seller through your realtor. Further, you may have to declare that short sale gain on your taxes but you will have to check with your accountant.

 

Reason

One of the reasons I'm creating this video is because I helped mediate short sales and foreclosures 10 to 15 years ago. If you remember that puts us around 2008. I dealt exclusively with owners who needed to short sale. It was
really hard to watch good people suffer but I was happy to help them get out of a situation in the best way possible. And it was nice to see their relief when it was all over. I want to help people on Oahu avoid foreclosures at all costs. And if possible, let's try to avoid short sales too.

If you think you may be in this situation, please feel free to contact me and I can create a net sheet to let you know if you're underwater and we can come up with a plan.

The good news is you have options. While the circumstances might not be ideal. A short sale is often the best option if the property is worth less than the owner owes on it. I hope this helps you in your current situation. If you have any additional questions you can always feel free to contact me and for more information about real estate or Oahu living please feel free to subscribe to my channel.

 

 

 

Posted in Real Estate Tips
Nov. 8, 2022

Oahu October Market Update

This is Jill Ward with Century 21 Island Homes with your Oahu October market update. Interestingly, we're seeing the trends in October that were the same as they were in September, and we're seeing them for both single-family homes as well as condominiums. So as you can see for single-family homes as compared to October of 2021, our median sales price has gone up 5% for single-family homes.

 

We're not at 1.050 million. The other thing that's gone up is the number of days on market. So we're up to 19 days on market as an average, which is up 90%. So those two statistics are up, are two statistics that are down are the number of listings that are being put on the. As well as the number of closed sales, so fewer listings, less supply, but the number of, um, transactions that are getting to the closing table have also decreased.

When we look at condos, we're seeing the same trends. The median sales price is up 4%. The number of days on market is the same as 19 days on market, we have fewer listings and fewer closed sales in the condominium realm as well. So statistically we are still in a seller's market. However, you can see from these stats that buyers are definitely gaining traction in terms of what they can negotiate in their negotiating power as, uh, the days on the market increase.

 

So let me know if you have any other questions. We get neighborhood statistics around the middle of the month, so if you ever need any, something a little more drilled down and specific, I'm happy to provide them numbers as well. Thank you so much. Have a great day.

Posted in Market Updates
Nov. 7, 2022

The VA Mortgage Explained

Do you qualify for a VA loan but are confused about how a VA mortgage works? In this episode of Aloha O'ahu, I'm going to explain to you why the VA loan is a smart way to finance your next home. We’ll find out what the VA loan is, who qualifies, and the steps you need to take to get the benefits.

What Is The VA Loan?

If you are a vet, using your VA loan is a really smart option. Of course, I'm going to speak generally about this type of loan because I'm not a lender. However, I can refer you to one for more complete information, and they can speak to you specifically about your situation.

First, what is a VA loan? A VA loan is a product that is available to active duty service members and veterans who have received an honorable discharge to help them purchase a home. The Veterans Administration does not provide the funds for the loan, but they do guarantee the loan up to a certain amount.

Loan Limits And Interest Rates

Let's talk about some of the key features of a VA loan. First, there is no longer a maximum loan limit as of 2020. However, there is a maximum amount the VA will guarantee in case of a default. In higher-cost areas such as Hawaii, the VA will guarantee you a loan of up to $1.073 million.

For any amount above that, you will have what is called a VA Jumbo loan. This may have slightly different rules that I will discuss as we go along. Two, VA loans usually have lower interest rates due to the VA guarantee than comparable conventional loans. Who doesn't like lower rates, especially now?

Downpayment And Closing Costs

Number three, VA loans require much lower down payments. In a few cases, the downpayment is as low as $0. Technically, all lenders offer 0% down payment options, though for VA loans, it’s below the guaranteed limit.

Once you get into the land of Jumbo VA loans, the lender may require a down payment. However, this is still going to be less than a conventional loan down payment. They also may require you to have a higher credit score. This lower downpayment is a key feature that opens up homebuying doors for many veterans.

Please note that it is the lender who can require as little as no money down, but there is a practical side to this. On the real estate side, the seller is going to want to see that the buyer is putting some money down so that they know you're serious. We can talk about that amount based on the property you're interested in buying.

Number four is closing cost limits. VA loans have specific limits on closing costs, which can help keep those costs down for veterans.

The Requirements

As you can see, the VA loan offers some great benefits for eligible buyers. There are some requirements and features that you must be aware of though as you look into a VA loan. To recap these key features of VA loans, there is no maximum loan limit, VA loans have lower rates, they have lower down payments, and there's a limit to closing costs.

VA loans must be used as the primary residence where the veteran is planning on living after the purchase. It can't be used for a vacation home or an investment property. Veterans have what is called the VA entitlement, which is the maximum amount the VA will guarantee for that veteran.

What this means in Hawaii (with our high price points) is that a veteran really can only have one VA loan at a time. This does not prevent you from selling a home and then using your entitlement for a new purchase, but it will require a little bit of time and work for your lender.

Funding Fees And Appraisals

VA loans have a funding fee that is paid upon closing. This fee can be rolled into your purchase so that you do not have to pay the money upfront at closing. The funding fee will range between 1.4% and 3.6% of your loan value, depending on if this is your first VA loan and the amount of your downpayment.

Also remember that if the veteran received a Purple Heart or had a service-related disability, then the funding fee is waived. VA loans also require very specific appraisals by designated appraisers. This is because the VA is actually guaranteeing your loan.

The appraiser will look closely at the safety and livability of the home as well as ensure that the home is properly permitted. The extra diligence on VA appraisals does scare some sellers. It may require extra work from your realtor to get your VA offer accepted.

In the end, even though there can be some extra steps and challenges in closing a VA loan, the savings and benefits are often well worth it. My home was purchased using a VA loan and it was definitely the right move for my family.

The Benefits Of The VA Loan

I hope this video gave you some insight into how a VA mortgage works. If you're interested in learning more about your VA eligibility, I'm happy to refer you to a lender that knows all about VA loans. They can delve into your goals and any debt issues you may need help with, coming up with a proposal specifically tailored to your needs.

Whether it's determining how to use a VA mortgage now or within the next six months, learning about all of your financing options is exactly how you make a smart and disciplined real estate investment. If you'd like to learn more, please feel free to contact me and I’ll be happy to connect you with a lender.

If you're interested in learning more about real estate and O'ahu living, please feel free to like this video and subscribe to the channel so you never miss an episode of Aloha O'ahu. Stay tuned to see what I feature next!

Oct. 31, 2022

What is a Deficiency Judgment?

If you are facing foreclosure in Hawaii, you may instead be able to short-sale your property to salvage your credit and settle your debt. If you are allowed to do so the lender may ask for a deficiency judgment. So what exactly is a deficiency judgment?

 

What is a Deficiency Judgment?

The term used by lenders to describe their loss is called a deficiency.

So let's walk through how your lender handles the money that they are owed when a home will be sold as a short sale. First, the lender can offer forgiveness people choose a short sale over foreclosure mainly to salvage their credit and settle their debt with the lender. The bank can forgive the debt that you owe, however, you plan on receiving 1099 at tax time.
When a bank sends 1099 to a borrower, they are reporting their loss to the IRS and its income to you. 1099 is a cancellation of the debt you owe. And once received, it technically needs to be reported as income and then that becomes a taxable event.

When the lender sends you 1099, they relinquish their right to pursue any deficiency against you. But then the problem becomes is now you have to report that as income and you're going to have to pay Uncle Sam at the end of the year.

It's all going to depend on your unique situation. So you're going to need to check with your accountant for specifics. A borrower who receives 1099 that resulted from a foreclosure or short sale can potentially be forgiven from IRS liability if the borrower is insolvent. Insolvency occurs when an individual has more debt and liabilities than they have assets. In most circumstances, the client involved in the short sale is suffering from financial hardship and may be able to claim insolvency.

Better Understanding 

Let's look at a simple example to make sure we're on the same page. So in this example, let's say the mortgage that you took out from the lender was $1 million. And over the course of time, you've already paid the lender $100,000. So now we're left with $900,000. We are able to short-sale your house for $800,000. That leaves a remainder that the lender is owed at $100,000.

So the 1099 form that you're going to receive from the lender will be for $100,000. So using that example, you will be taxed an additional $100,000, unless you are insolvent. As an alternative, the lender can issue the borrower a promissory note for a specified amount to be paid monthly over a number of years. This is a lender's way of getting more money out of the seller which an experienced negotiator can actually address with the lender. If you cannot show financial hardship, then
the bank is more likely to ask you for one of these. These are four likely reasons for a promissory note or a cash contribution.

Number one, the borrower is already strong financially. Number two, the loss to the lender is considered large, usually over 50%. Number three, the borrower is current on their payments. And number four, there's a PMI company involved. The third way the bank may require you to settle your partial or total debt is through a cash contribution paid at closing. Sometimes the lender may ask for a nominal amount of cash at closing in amounts such as $5,000 to cover some of those closing costs.

The Good News

This also tends to be asked if any of the above scenarios are in place. Knowing your foreclosure timeline is extremely beneficial should you find yourself in a position of falling behind on your mortgage payments. While it may be uncomfortable, you must stay in touch with your lender.

In all of this, the good news is that the earlier you address this issue, the more options you are going to have. One of the options is to remain in the property until they literally kick you out. For your financial future, You may not want to do that. 

I'm Here To Help

The next option is going through a process called the short sale. This is typically the best option when you need to rid yourself of the property. You'll avoid foreclosure, settle your debt, salvage your credit and be able to begin rebuilding your financial future.

If you would like more information on this and would like to speak specifically about your situation please feel free to reach out. If you found this information helpful. Please click and feel free to subscribe to the channel below for more information about real estate and Oahu living.


Thank you!

 

 

Oct. 30, 2022

How A Short Sale Can Help You Avoid Foreclosure

Do you owe more on your Hawaii property than it's currently worth, or are your mortgage payments racking up because of some other life circumstance? In this episode of Aloha O'ahu, I’m going to explain how to sell your house for less than you owe to avoid foreclosure. I’ll show you how a short sale can allow you to walk away without filing for bankruptcy and potentially with lender forgiveness.

 

Understanding Your Options

Rather than foreclosing, you have two options you can try first. The first step is always to talk to your lender about what options you have for your O'ahu property. They may be able to work out different payment options for you before short sales or foreclosures are even part of the discussion.

If you are in arrears and cannot work something out with the lender, your next option is to short sale your property. A short sale occurs when the bank or lender accepts less than what you owe on your property. The truth is that most times the bank would rather receive the proceeds from a short sale versus going into foreclosure.

This is because they lose a lot more money doing that. They aren't being nice; they're just mitigating their loss.

Short Sale Benefits

You might be thinking, what's in it for me? First, you'll avoid that foreclosure from showing up on your credit report. Once it appears on your credit, it's extremely damaging. It will likely affect your ability to rent, apply for a credit card, or buy again in the future. A short sale on your credit report is much preferred to a foreclosure.

A foreclosure on your credit is much like filing for bankruptcy, so you want to avoid your Hawaii foreclosure if at all possible. Also, once your house goes into foreclosure, there is no guarantee that the bank won't come after you for your past-due payments. This is called a deficiency judgment; you can watch my other video about deficiency judgments to give you an idea of what you can expect a lender to require in terms of repayment.

When you opt for a short sale, you remain in control of the situation. The bank owns the note attached to the title of your property. They dictate what they're willing to accept based on the amount of the debt owed. You are the owner of record on the property and the one who can accept, reject, entertain, or respond to the offers on your property.

How It Works

Once an offer is accepted and then approved by the lender, the transaction proceeds. The realtor is in communication with the lender to get that sale to the closing table. If all goes well, the property is closed on. Then you, the seller, will no longer have an obligation.

You will sign a form saying that you short saled your property. Often, the bank does not attempt to collect any further funds from you. Please know that the lender can forgive the balance or they can try to pursue a deficiency judgment. In some cases, they will continue to communicate with you the seller through your Realtor.

Further, you may have to declare that short sale gain on your taxes—though you’ll want to check with your accountant.

I’m Here To Help

One of the reasons I'm creating this video is because I helped mediate short sales and foreclosures 10 to 15 years ago. If you remember, that puts us around 2008. I dealt exclusively with owners who needed to short sale.

It was really hard to watch good people suffer.  However, I was also happy to help them get out of a situation in the best way possible, and it was nice to see their relief when it was all over. I want to help people on O'ahu avoid foreclosures at all costs and, if possible, try to avoid short sales, too.

If you think you may be in this situation, please feel free to contact me. I can create a net sheet to let you know if you're underwater and we can come up with a plan. The good news is you have options. While the circumstances might not be ideal, a short sale is often the best option if the property is worth less than the owner owes on it.

I hope this helps you in your current situation. If you have any additional questions, you can always feel free to contact me. For more information about real estate or O'ahu living, please feel free to subscribe to this channel so you never miss an episode. Stay tuned to see what I feature next!

Posted in Real Estate Tips