Short Sale Team of Western MA
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The document defines a short sale as the transfer of ownership of property from one person to another for a price that is less than what is owed on the property. It then discusses meeting with an attorney, accountant, and realtor to review the options and consequences of a short sale. Key points include potential tax consequences, qualifying for the short sale, valuing the home, documenting hardship, controlling the sale process, and deciding on a short sale approach like HAFA or traditional. The goal is to make the best deal possible for the homeowner.
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Short Sale Team of Western MA
- 1. Presented by Nyles L. Courchesne Lesley Lambert Sonny Drenen Peskin, Courchesne & Allen, P.C. Park Square Realty Drenen Financial Services, Inc. 32 Elm Street 44 Elm Street 36 Elm Street Westfield, MA 01085 Westfield, MA 01085 Westfield, MA 01085 Tel: 413-734-1002 Tel: 413-575-3611 Tel: 413-642-3177 www.pcalaw.net www.westernmahomes.net www.drenenfs.com
- 2. “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
- 3. “Short Sales” Defined Insufficient funds
- 4. 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?
- 5. Our Goal is to Review all of the Possibilities and Consequences of a Short Sale
- 6. Your Most Valuable Asset
- 7. Get Your Team Together
- 8. The Order Does Not Matter Attorney Meeting Accountant Realtor Meeting Meeting Just meet with all three before you GO!
- 9. Outline of a Short Sale Plan Short Sale Plan Attorney Meeting Accountant Realtor Meeting Meeting Short Sale Options Cooperative Classic HAFA Approach Approach
- 10. Attorney Meeting
- 11. Attorney Meeting Agenda Qualification Review Title Review Tax Review Realtor Review
- 13. Title Review
- 14. Meeting with your Accountant
- 15. Accountant Meeting Agenda Tax Consequence Review Federal Tax / Exemptions State Tax Planning
- 16. Short Sale = Debt Forgiveness= Taxable Income
- 17. 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.
- 18. 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
- 19. EXCLUSIONS • Bankruptcy • Insolvency • Qualified Principal Residence Indebtedness
- 20. 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.
- 21. 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.
- 22. WHAT IF THE 1099-C IS ISSUED TO THE WRONG TAXPAYER?
- 23. WHAT IF I NEVER RECEIVED A 1099-C FOR MY DEBT FORGIVEN?
- 24. Realtor Listing Appointment Valuing the home Documenting Hardship and Value Anticipating Costs Controlling the Sale Seller Contribution
- 25. Valuing the Home We are looking for market value
- 26. Getting the Documents Together
- 27. Review Outstanding Costs Get the attorney involved to anticipate costs and work deficiencies into the agreement
- 29. Making a Good Deal with and for the Seller
- 30. Get that Attorney Involved and Make a Custom Plan
- 31. Decide on the Process • FHA • HAFA • Cooperative • Traditional • General Contract Clauses • Specific Contract Clauses
- 32. 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
- 33. 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
- 34. Avoid Investors (generally) People Trying to “Flip” Homes
- 35. Specific Strategies • Bank Specific Applications • Lien Payment • Utility Payment • Miscellaneous Cost Payments
- 36. Short Sale Cycle Processor Updates Status Realtor Assist with Document Offers Updates Attorney Counter Offers Review
- 37. Plan for Success