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The team of Attorney Nyles Cou
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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 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– \short\ 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
“Short Sales” Defined
Insufficient funds
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 the Possibilities and Consequences
of a Short Sale
Your Most Valuable Asset
Get Your Team Together
The Order Does Not Matter
Attorney Meeting
Realtor Meeting
Accountant Meeting
Just meet with all three before you GO!
Outline of a Short Sale Plan
Short Sale Plan
Attorney Meeting
Accountant Meeting
Realtor Meeting
Short Sale Options
HAFACooperative
ApproachClassic
Approach
Attorney Meeting
Attorney Meeting Agenda
Qualification Review
Title Review
Tax Review
Realtor Review
Qualification Review
Title Review
Meeting with your Accountant
Accountant Meeting Agenda
Tax Consequence Review
Federal Tax / Exemptions
State Tax
Planning
Short Sale = Debt Forgiveness=
Taxable Income
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 Debta) 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 IS ISSUED 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
Getting the Documents Together
Review Outstanding Costs
Get the attorney involved to anticipate costs and work deficiencies into the agreement
Controlling the Sale
Making a Good Deal with and for the Seller
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 Status
Offers
Counter OffersAttorney Review
Realtor Assist with Document
Updates
Plan for Success