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Short Sale Information Provided by NancyGribble and the South Shore FLTeam. SouthShore, Bayshore, Beaches Weve Got You Covered! Palermo Real Estate Professionals, 1501 S Dale Mabry Hwy, Tampa FL 33629 Slide 2 DISCUSSION TOPICS DEFINITION PURPOSE SUCCESS FACTORS TAX RAMIFICATIONS. PROCESS FAQ We are not accounts or attorneys. Always seek such advice from the appropriate professional. Slide 3 DEFINITION What is a Short Sale? When your lender agrees to discount their payoff to accommodate the sale of your property. Requirements: Hardship prevents continued ownership. Sale value is less than loans + liens + selling costs. Delinquent (or defaulted) loan. Home owner cooperates in providing documentation We are not accounts or attorneys. Always seek such advice from the appropriate professional. Slide 4 PURPOSE OF A SHORT SALE Facilitate Sale of Property to avoid foreclosure Benefits the Lenders by: Reducing the proportion of bad debt for which they are accountable. Avoiding foreclosure costs and greater losses. Keeps Home Occupied to avoid vandalism. Benefits to the Seller / Borrower: Avoid Foreclosure Better Credit Score.* Missed payments: score affected by approx. 30 to 100+ points. Foreclosure: score affected by approx. 140 to 300 + points. Save money: stay in home mortgage free during the process.. Its the right thing to do. Seek advice of an Attorney or Accountant to verify your situation Slide 5 SUCCESS FACTORS When is a short sale more likely? Seller can show legitimate hardship. The property is marketable (for less than current mortgage). When the most junior lender can receive approx. 20% of the original loan amount. The same lender holds the primary and secondary mortgages. Seller is willing to provide all documentation requested. When financial application can show insolvency (This is a cash flow statement, not total assets view). There is still ample time (ideally 4+ months) before foreclosure. Slide 6 SUCCESS FACTORS When is a short sale highly unlikely? No seller hardship can be shown. Seller is current on all loans and no anticipated missed payments. (However, it can still be done.) When seller is in Chapter 7 or Chapter 13 bankruptcy. When seller has completed a recent refinance with cash out. When there is insufficient proceeds to pay the most junior lender approximately 20% of the original loan amount. When the seller is unable/unwilling to provide all documentation requested. When liens and/or judgments exist with third parties. When there is insufficient time prior to foreclosure. Slide 7 TAX RAMIFICATIONS Please seek advice from an Attorney or CPA. Slide 8 PROCESS: NAVIGATION Agree to authorize representation to the bank. Complete a statement of information. Consult legal and/or tax counsel. Properly evaluate viability of the short sale. List the property on the MLS Subject to short sale lenders approval Start assembling the short sale submission package. Slide 9 PROCESS: SUBMISSION PACKAGE Cover letter Completed financial disclosure Hardship letter Purchase contract Net sheet or HUD-1 form Proof of income for past 2 pay periods Copies of last 2 bank statements Copies of last 2 years of full tax returns Third party authorization form Slide 10 FAQ Following are the FAQ from the IRS website www.IRS.gov www.IRS.gov - What is the Mortgage Foregiveness Debt Relief Act of 2007? Exclusion of income from modification of mortgage on your principle residence What does it mean for me? Excludes certain canceled debt on your principle residence Does this apply to all forgiven or canceled debts Only debt used to: Buy Build Substantially Improve Or to refinance debt used for those purposes Slide 11 FAQ (continued) Does this provision apply for the 2007 tax year only? NO 2007, 2008 and 2009 are covered Does this apply to debt forgiven on second home, credit card or car loan NO only debt associated with principle residence Does the non-forgiven debt qualify for exclusion under any other provision? Maybe Insolvency exclusion Title 11 bankruptcy IRS Form 982 gives instructions Limit on amount? None for loans less than 2 million for married filing jointly Slide 12 SUMMARY Always check with a Tax Attorney or CPA first. Qualifications: Hardship and Insolvent is preferred. 100% of Senior Note and 20% of Junior or 80% of Senior note with no Junior. Exclusions of tax liability with short sales: Section 1401. Mortgage Forgiveness Debt Relief Act of 2007. Principal residence. Approved Indebtedness. Slide 13 FOR A NO OBLIGATION CONSULTATION Contact: Nancy Gribble, ABR 813-263-4294 NancyG@TampaTeam.com www.SouthShoreFLTeam.com Palermo Real Estate Professionals, 1501 S Dale Mabry Hwy, Tampa FL 33629