As unfortunate as it can be when homeowners fall behind on mortgage payments and must face the possibility of losing their homes, short sales and foreclosures provide them options for moving on financially. The terms are often used interchangeably, but they’re actually quite different, with varying timelines and financial impact on the homeowner. Here’s a brief overview.
A short sale comes into play when a homeowner needs to sell their home but the home is worth less than the remaining balance that they owe. The lender can allow the homeowner to sell the home for less than the amount owed, freeing the homeowner from the financial predicament.
On the buyer side, short sales typically take three to four months to complete and many of the closing and repair costs are shifted from the seller to the lender.
On the other hand, a foreclosure occurs when a homeowner can no longer make payments on their home so the bank begins the process of repossessing it. A foreclosure usually moves much faster than a short sale and is more financially damaging to the homeowner.
After foreclosure, the bank can sell the home in a foreclosure auction. For buyers, foreclosures are riskier than short sales, because homes are often bought sight unseen, with no inspection or warranty.
Jennifer and I understand the importance of excellent 5-star Guest Hospitality through the eyes of being extensive travelers. We have stayed at many Airbnb’s and spent hundreds of nights in hotel rooms. These many travel experiences have influenced the way that we have set up our Airbnb locations. In addition to our Airbnb Hosting: I am a local real estate rental professional, a college professor (project management and entrepreneurship) and the Past President of a local Rotary Club. Jennifer is a director at a National Healthcare Consulting Firm. We live within a few blocks of our Airbnb properties.
Congratulations to our clients Mark and Mary Minotti of Property Circle LLC on the purchase of their North Haven, CT project/flip house today.
Over the next few months, they will tastefully update this 1950’s ranch home into a 2019 Dream Home. Watch the renovation progress on this blog as their project unfolds.
This transformed home will be available for purchase just in time for our spring 2019 buying market. It’s ideally located close to the new Amazon Distribution Center and the North Haven Campus. Potential buyers who are interested in getting on the waitlist for this one should contact me.
Today (June 6th) marks the 85th anniversary of The Revenue Act of 1932. The Tax Act was designed to close a significant federal deficit (general fund) gap of just over $1 billion at the time. A component of the 1932 Tax Act was a 1 cent/gallon temporary gas/fuel tax that was scheduled to expire in 1934, this tax is known as the Federal excise tax on gasoline. Initially this excise tax was intended strictly for deficit reduction and not dedicated to building or maintaining infrastructure (roads and bridges).
Like all taxes, the Federal excise tax on gasoline never expired but it expanded. Today the excise tax sits at 18.4 cents/gallon for gasoline and 24.4 cents/gallon for diesel where it has remained steady since 1997 (the Clinton Administration). From it’s origins in 1932 until 1997 the excise tax was split in various percentages between deficit reduction (general fund) and infrastructure (Highway Trust Fund) but in 1997 President Clinton redirected the entire excise tax (100% of it) to the Highway Trust Fund. The Highway Trust Fund takes in about $35 billion a year from the Federal excise tax, which many lawmakers argue is insufficient to the tune of about $15 billion annually for maintaining the Nation’s infrastructure. Many lawmakers, including the normally tax increase adverse GOP, have been calling for increases on this Federal excise tax for many years arguing that it is a consumption tax that pays for the infrastructure which it’s consumers (travelers) are using.
Trump’s Infrastructure Plan: Trump has proposed to spend $1 trillion over 10 years on critical infrastructure spending plan to rebuild the country’s roads, bridges, airports, electric grid and water systems. Washington insiders have pegged the realistic direct federal spending on infrastructure much lower than $1 trillion at a range of $200 – $300 billion dollars, which is still significant. This is no clear pathway for Congress on how they would find the lower number of $300 billion in new money to pay for this plan. With funding details for this plan currently about as clear as mud, the one thing for certain is that consumers can expect to pay significantly more at the pump in terms of Federal excise tax.
If just $300 billion of new infrastructure spending is approved over 10 years, it would translate to the Federal excise tax on gasoline increasing by 15.77 cents/gallon to 34.17 cents/gallon assuming consumers had to foot the entire bill.
Some of the obvious benefits of the proposed increased in infrastructure spending include: fixing a crumbling infrastructure that is badly in need of repair, lower vehicle repair costs to drivers caused by poorly maintained roadways, a safer transportation system, more jobs and less pollution emissions given that the higher cost of driving will reduce the amount of driving that takes place.
The big downside of the increased infrastructure spending is the additional pain at the pump for consumers and truck drivers. As most drivers know, the Federal excise tax isn’t the only tax that they pay at the pump. Drivers also pay State & Local gas taxes that vary from 12.25 cent/gallon in Alaska to 58.20 cents/gallon in Pennsylvania (30.64 and 76.60 cents respectably with the Federal excise tax included). The table above illustrates the State gas tax rates per gallon ranked from highest to lowest.
An increase in the Federal excise tax of 15.77 cents to cover the $300 billion in new infrastructure spending would translate into a 20 – 50% tax increase at the pump. In real dollars the increased tax equates to an additional $165 per year / per car that consumes 20 gallons per week.
If for some reason the entire $1 trillion in infrastructure spending was approved and passed onto consumers at the pump, which is highly unlikely, then it would translate into an increase in the Federal excise tax of nearly 50 cents per gallon representing a 65 – 163% tax increase at the pump with out of pocket cost to consumers increasing in excess of $500 per year / per car that consumes 20 gallons per week.
The silver lining in this $1 trillion cloud is that the increased tax would probably put the U.S. into compliance with the Paris Climate Agreement by significantly reducing the number of cars on the road and thereby reducing our emissions.
So the question is do we root for higher Federal excise taxes given that the societal benefit seem to be substantial while on the other side of the ledger the penalties for low-wage earners would be potentially devastating?