I don't know if Florida is ground zero for short sales but we certainly have a number of them. We also have quite a number of foreign buyers as defined by IRS rules, I.e. do not file tax returns. So how does this ad to the mix you might ask?
Well we all know about the 10% FIRPTA withholding. So on a short sale owned by a foreign buyer the lender needs to be aware and approve. Simple.
Except.... The IRS wants the 10% on the agreed upon sale price AND on the amount of debt forgiveness! So basically on the total amount of the mortgage owed.
Here are various scenarios to entertain us realtor who obviously have not enough to do on short sales.
One, the seller -- already upside down, has to bring money to the table. Does not have it. Are you surprised that all the heads are turning towards you, the realtor, to come up with the difference? If not, no closing and all that time, energy and effort gone to waste.
Here is another. Seller somehow comes up with the difference in monies owed ON THE FIRPTA -- then after the closing, files tax return proving losses and the concomitant application for tax reduction and gets monies back from IRS on the amount "forgiven".
Want to make the closing happen? Make sure the lender has requested the seller to file form 8288B so that ONLY the monies that need to be paid are withheld and no monies can go back to the seller.
It is just one more step but such an important one and if you are representing either buyer or seller in a short sale ASK, ASK,ASK and get as much information as possible form the very beginning or you may just have wasted valuable time, energy, money and future business.
Other than that the weather is fab in Miami!
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