Presented byNyles L. Courchesne Lesley Lambert Sonny DrenenPeskin, Courchesne & Allen, P.C. Park Square Realty Drenen Financial Services, Inc.32 Elm Street 44 Elm Street 36 Elm StreetWestfield, MA 01085 Westfield, MA 01085 Westfield, MA 01085Tel: 413-734-1002 Tel: 413-575-3611 Tel: 413-642-3177www.pcalaw.net www.westernmahomes.net www.drenenfs.com
“Short Sales” Defined– shȯrt Function:adjective Etymology:Middle English, from Old English sceort; akin to Old High German scurz short, Old Norse skortr lack not coming up to a measure or requirement : insufficient funds <in short supply> b: not reaching far enough <the throw to first was short> c: enduring privation d: insufficiently supplied– sāl Function:noun Etymology:Middle English, from Old English sala; akin to Old High German sala transfer, Old English sellan to sell1: the act of selling; specifically : the transfer of ownership of and title to property from one person to another for a price
Is a Short Sale the Answer ? What are the costs? How long do they take? How will this effect my credit? What if I have 2 mortgages? Are there tax consequences? Why not just file bankruptcy? Should I stop paying my mortgage? Can I receive any proceeds?
Our Goal is to Review all of thePossibilities and Consequences of a Short Sale
Debt Forgiven• 1099C – Debt forgiven reported on line 2. • If interest is reported on line3 and the interest would have been deductable then subtract it from line 2 before reporting.
Cash Basis• Cash basis taxpayers do not realize income from COD if the payment would have been deductable. ie: – Property taxes – Interest if it would have been deductible
EXCLUSIONS• Bankruptcy• Insolvency• Qualified Principal Residence Indebtedness
Insolvency• Insolvency • Use insolvency worksheets to determine extent of insolvency immediately before the cancellation. • Definition: Liabilities are more than the FMV of all assets immediately before the cancellation. - File Form 982 and check the box on line1b. On line 2 include the smaller of “ Debt Cancelled” or the amount “Insolvent” immediately before the cancellation. Reduce attributes.
Principal Residence Debt• Qualified Principal Residence Debt a) Must be acquisition or improvement debt b) Use ordering rule and worksheet to determine “ Qualified Principal Residence Indebtedness If keeping the residence – you must reduce the basis by the amount of debt forgiven.
WHAT IF THE 1099-C ISISSUED TO THE WRONG TAXPAYER?
WHAT IF I NEVER RECEIVED A 1099-C FOR MY DEBT FORGIVEN?
Realtor Listing Appointment Valuing the home Documenting Hardship and Value Anticipating Costs Controlling the Sale Seller Contribution
Valuing the Home We are looking for market value
Get that Attorney Involved and Make a Custom Plan
Decide on the Process• FHA• HAFA• Cooperative• Traditional• General Contract Clauses• Specific Contract Clauses
Four Short Sales Formats HAFA: No Deficiency Up to $3,000 Seller Incentive Cooperative: No Deficiency Up to $2500 Seller incentive FHA: No Deficiency Up to $1,000 Seller Incentive Traditional: Possible Deficiency / Note / Contribution or Seller Incentive
General Contract Strategies• Prepare for Delays• Require Buyers to Inspect right away to take advantage of interest rates and market inventory• Require “as is” offers after inspections and avoid credits and assistance loans if possible• Include a “drop dead” date so that your Buyer has the option to move on if the short sale is not happening
Avoid Investors (generally) People Trying to “Flip” Homes
Specific Strategies• Bank Specific Applications• Lien Payment• Utility Payment• Miscellaneous Cost Payments
Short Sale Cycle Processor Updates StatusRealtor Assistwith Document Offers Updates Attorney Counter Offers Review