short sale team of western ma

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