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.

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

12. Qualification 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

28. Controlling the Sale

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