Short Sales for Foreign Owners. Do they make sense?

Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

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Hi folks. I received a very interesting email today. Here it is:


I'm English, live in China, and have NO USA contact except I own an investment home in Davenport. Loan is 220k, worth maybe mid-100's. Do I walk (non-recourse…remember, I’m in China!) or short sell? Appreciate your advice..

Interesting question to say the least. And honestly I’m not sure how to respond. His question brought up a whole bunch of new questions in my head.

  •  What recourse would the lenders have on a foreign investor?
  •  How would it affect his credit? 
  •  Is there any advantage at all for a Foreign owner to go through the Short Sale process.

My market area is about 20 minutes to Disney and this issue is going to be coming up quite frequently.

Richard Zaretsky wrote a post last year about Short Sales and FIRPTA that you may find interesting as well.

Short Sales are not always straight forward transactions. It’s extremely important that we don’t use cookie cutter responses like “A short sale is far better than being foreclosed on”. Is it?

I need answers. Do you have any?

Available Short Sale Agent Training:

Bryant Tutas
Tutas Towne Realty, Inc
Licensed Florida Real Estate Broker

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Melissa Polce
ERA, Wilkinson Real Estate Charlotte - Huntersville, NC
Lake to Land, I've Got It Covered!

Thanks so much for the blog, interesting to think about, especially in FL...not alot here! Have a great weekend!

Oct 23, 2009 08:45 AM #1
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Bryant- We have done a few short sales for foreign nationals with no problems.

On another note- about whether a short sale is better than foreclosure- I think that most of the time it is but also that in many instances a bankruptcy is the best answer for many people. We can close short sales while they are in bankruptcy with the permission from the trustee. We have closed several of those also. Katerina

Oct 23, 2009 08:51 AM #2
"The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL

Geesh Hun...

Need I say more? :)


Oct 23, 2009 08:53 AM #3
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

If he's planning on using his credit in the United States anytime in the next 7 years or if he has reachable assets, it might be better to try and negotiate a short sale.  If not, why should he care about doing a short sale?

Oct 23, 2009 09:57 AM #4
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX


"Short Sales for Foreign Owners. Do they make sense?" 

On the face of it your question is superfluous! Banks accept Short Sales because they are good for the bank, not the debtor, witch makes "for Foreign Owners" irrelevant unless the bank is foreign owned.

The collectible of foreign owners may enter the equations, but is the proposed short sale good for the lender?

On the other hand, FIRPTA is a huge question! Unless what you meant was"non-resident alien"we're not talking about a primary residence so there would be tax on forgiven debt, how do you with hold tax from nothing? And, who's libel for not with holding the non-existing?

This is not the time to call your pernial first quarter tax specialist!

Great though provoker! To bad about the title. :>)


Oct 23, 2009 09:58 AM #5
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Bryant - Just thinking it through- it must cost a creditor a lot more to pursue someone out of the country for collections. Would they even bother?  Then again, there must be firms that specialize in this, too.  I'd like to know more.

Oct 23, 2009 10:48 AM #6
Fred Carver Personal Real Estate Corporation
RE/MAX Camosun Victoria BC Real Estate - Victoria, BC
Accredited Real Estate Consultant

Hi Bryant..Maybe find out his motivation first, no need to sell if he is not in arrears, the market will come back. When I first started back in the Cave man days..people bought homes knowing they would own them in 25 thought of what it was worth year by year.

Cheers, Let us know what happens :O))

Oct 23, 2009 12:13 PM #7
Jimmy Williams (352) 874-2354
Classic VI Realty - Mount Dora, FL
Lake and Western Orange County Real Estate Expert!


A really thought provoking question!!  However after reading (skimming) Richard Zaretsky's blog about short sales and FIRPTA, I don't know if I would jump into a sale where the IRS does not have guidelines in place to regulate the sale.  Very dangerous territory for my taste, and what would the commission be on a 80 to 90 thousand dollar sale.  Is the not knowing really worth it.  In our area there is just too much business to go after, without this type of baggage.

As for your question to the foreign national I believe that a deed-in-lieu would be the best way to go (just my opinion).


Great Question!!




Oct 23, 2009 02:29 PM #8
Steve Shatsky
Dallas, TX

Hi Bryant... Let's cut to the "real" question here for an agent who might handle this short sale... How much do long distance phone calls to China cost per minute?  Do they make calling cards for those calls?  Seriously though, we have worked with clients who were non-US citizens residing in Mexico and had no difficulty (except for the phone calls) in getting the short sale done.

Oct 23, 2009 03:10 PM #9
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

I got a bizarre "Chinese lead" last week. To be honest, I was very suspicious of it, so I didn't respond. I read it over and over again, trying to make sure it was not legit. I was never positive, but I decided to err on the side of safety =/

Oct 23, 2009 04:54 PM #10
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Probably a short sale will make sense, kind of depends on his tangible assets.  There's a number of other possible options for foreign nationals.  All require the use of an attorney.

Oct 23, 2009 11:06 PM #11
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

Had a foreign short sale with BoA .  .did not go anywhere. My client was deported to Mexico and it became a nightmare. . at the end.

I simply stop calling them, moved on and waited for the foreclosure ax

Bank of America lost big time because I had a ready buyer. . meanwhile the house depreciated over 50% 

My client was simply tired of going to the embassy to notarize papers for us ( 3 Times) 

Oct 23, 2009 11:39 PM #12
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

BB: I would refer this client to a CPA who understands the ramifications of canceled debt and not make any statement about which way to go. For one thing, there is not enough information to make a judgment call and for another, it's not my place to make it. I'm not licensed to dispense tax advice.

sacramento short sale agent

Oct 24, 2009 04:08 AM #13
Robin Rogers
Robin Rogers, Silverbridge Realty, San Antonio, Texas - San Antonio, TX
CRS, TRC, MRP - Real Estate Investment Adviser

I moved to England in 1996, after having bought and sold real estate and building up a stellar credit history. It was useless in England. I had to start all over. Opening a bank account and getting a phone line was a nightmare, and it was 6 months before the bank trusted me with a checkbook so I could easily access my own money. When I moved back to the US, all the credit I had built up in England, again buying and selling real estate and opening department store cards and utility accounts, was worthless. And being off the radar for so long in the US didn't help.

Therefore, I doubt if a short sale or foreclosure would make a whole lot of difference to your customer as far as his credit.



Oct 28, 2009 02:40 AM #14
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Bryant - what wuld be  the benefit for the Seller to do short sale? He is not going to get a penny (this is a short sale), so the reasons to do it could be saving the credit, avoiding potential judgement, etc, but the guy can't care less about credit... Why bother?

I also do not think FIRPTA could be an issue even if he decided to do the short sale. Unlike "regular" tax, FIRPTA requires the Title Companies to take the money, so if the guy would be short selling, it will be done by the closing attorney, and the bank would most probably  have to pay it as what can you get from the Seller anyway?

Oct 29, 2009 05:23 PM #15
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

There are several exceptions to the withholding requirement (but not to the notification requirement), one of them states

"when the amount the transferor realizes on the transfer of a U.S. real property interest is zero". 

In a short sale where the seller/transferor receives "zero", this then should apply.

Nov 04, 2009 11:26 AM #16
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