Are you ready for another hurdle in the already cumbersome short sale transaction? If your property is in the state of Florida you may just be subject to additional tax at the closing or after the closing.
In the state of Florida we do NOT have any income tax. One of the biggest income generators for the state of Florida is in the collection of Documentary stamp tax paid on the notes and deeds in the transfer of Real Property in our state.
There is now a dispute with the Department of Revenue of the state of Florida in regards to how this is calculated in a short sale transaction.
What has happened is that at the closing the Doc Stamp Tax is paid by the seller in Palm Beach County on the deed. This is how it has always been on any transfer of real estate. You calculate the amount of the deed with 70/100 and come up with the amount that is paid at closing for this tax.
Well, all of a sudden the state is saying they want the title companies to charge the stamp tax not just on the deed but on the forgiven amount as well. We have never heard of such a ridiculous statement. As if it is not hard enough to do a short sale as it is. If the third party lenders refuse to pay this additional amount and the seller does not have the money to pay it, this becomes a broken dea.
This is just a disaster waiting to happen unless the state backs off and realizes that these homeowners are mostly in foreclosure status already, they don't have the extra money to pay.
This is also going to be hard to enforce and also to calculate. What is the state going to use as the standard as to what was owed in the first place? It really makes no sense. If the IRS can forgive the debt than the state should as well.
The Florida Association of Realtors talked at length with the Department of Revenue, the Attorney General's office for the state of Florida and the Governor's office to let them know what a disaster this can turn into. Do they really want even more distressed properties? This will shut down the short sale transaction and lead to an even softer market than we are already experiencing. FAR was in a 2 hour meeting with 8 employees of the DOR and the head of the agency and their counsel.
Please be advised that this one page letter that went out throughout the state of Florida on the DOR letterhead was written by one employee of the DOR ( Hmmm, what was that person thinking, or NOT!) and stated that the tax is due on the higher amount. This opinion was based on a phone call made to the help line.
This is NOT the official position of the Department of Revenue.
FAR has been helping and offering to educate the staff of the DOR to understand what a short sale is and why they are killing the deal with a position such as this. FAR has also requested the DOR to participate in a TAA, A Technical Assistance Advisory to develop a form to use for short sales.
Florida Association of Realtors has been working for about a month on this issue. While we hope the outcome will be what makes sense with the only the deed amount being taxed, it may also not turn out the way we want it to. If it turns out to be an adverse decision FAR will immediately explore "amnesty" avenues in the state Legislature on past short sale transactions.
FAR just received a notice this week that the DOR will have the TAA ready soon. Most of the time these kinds of advisories take a long time to complete. The expedient manner in which the DOR worked on this hopefully shows that they know we are facing a serious issue with short sales being successful here in the state of Florida. Please stay tuned as we find out the details to this important topic.
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Contact Nestor Gasset and Katerina Gasset, CIPS, Realtors®, International Properties and Investments, Inc. Licensed Realtors® in Florida at 561-753-0135 to list your property for sale or to purchase a property in Wellington, Royal Palm Beach, Loxahatchee, Lake Worth, Hypoluxo Island, Lantana, West Palm Beach and the rest of Palm Beach County Florida and Port St Lucie Florida. We are accepting referrals.
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Copyright © 2008 By Katerina Gasset, All Rights Reserved.* Short Sales- Florida State Documentary Stamp Tax Upon Transfer of Property*
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