SHORT SALE DISCLOSURES

The following disclosures should be given to Buyer(s) and/or Seller(s) in a Short Sale transaction in the state of California:

1) Transfer Disclosure Statement (TDS form). Must be filled out by the Seller(s) and given to the Buyer(s) in every real estate transaction which involves residential 1-4 unit dwelling. This is the form where the Seller discloses all facts that he/she knows about the property to the Buyer.
2) Disclosure Regarding Real Estate Relationships (AD form). This form disclose of the relationships between the Agent and Principle (Buyer or Seller). The Listing Agent should give only one form to the Seller(s). The Selling Agent should give one form to the Buyer(s), and one form to the Seller(s), providing that the Buyer(s) and the Seller(s) are represented in the transaction by different Agents.
3) Lead-Based Paint Hazard Disclosures (FLD form). This should be given to the Buyer(s) by the Seller(s) if the property being purchased was built before 1978.
4) Statewide Buyer and Seller Advisory (SBSA form). This form educates the Seller(s) and the Buyer(s) about the inspection that they will have to do, California's laws, taxes, etc.
5) Water Heater and Smoke Detector Statement of Compliance (WHSD form). This form should be given by the Seller(s) to the Buyer(s), assuring the Buyer(s) that at the end of the transaction the Water Heater and the Smoke Detectors will be in compliance with the current law.
6) Seller's Affidavit of Non-Foreign Status (AS form). Should be given from the Seller(s) to the Buyer(s), stating the Seler's SSN or TIN number. If the Seller(s) does not feel comfortable to disclose this information to the Buyer(s), they can give this inormation to the Escrow company and the Escrow should issue the letter-certificate to the Buyer(s), that they received the AS form or certificate from the Seller(s).
7) Seller Property Questionnaire (SPQ form). This form should be given by the Seller(s) to the Buyer(s) to answer the questions and conditions about the property that is being transferred.
8) Natural Hazard Disclosure Statement (NHD form). This is given to the Buyer(s) by the Seller(s). All the Natural Hazards about the area where the property is located should be disclosed by the Seller(s) to the Buyer(s). If the Seller is not sure, they should hire a third party company to do the required reports.
9) Agent Visual Inspection Disclosure (AVID form). This should be given to the Buyer(s) and Seller(s) by the Real Estate Agent, disclosing any defects about the property that were found by the Agent during the inspection.
10) Short Sale Addendum (SSA form). This form should be given to Buyer(s) by the Selling Agent to sign, and should be submitted to the Seller(s) together with the purchase contract.
11) Short Sale Listing Addendum (SSL form). This should be given to the Seller(s) by the Listing Agent at the time when the listing is taken.

Ihor Pochay
REALTOR / SHORT SALE SPECIALIST
Tarbell, Realtors
Cell: (562) 334-7393
Off: (909) 629-6186 Ext. 339
Fax: (909) 629-6710
ihorpochay@tarbell.comwww.MyRealtorIhor.com

Tax Effects from the Short Sale

The tax effects can be very significant on a homeowner. It is advisable to get professional advice from a Tax Attorney and a CPA before the seller will have to pay taxes on the forgiven debt (difference between the indebtness and the sale price of the home). In December 2007, the President signed a new bill, "The Mortgage Forgiveness Debt Relief Act," which forgives the debt for the homeowners who did the Short Sale or Foreclosure on their primary residence in 2007-2009. The homeowner still will receive the 1099-C Form (Cancellation of Debt) from the Lender by the end of the year. After receiving the 1099-C the homeowner should carefully look through the form and check for any discrepancy (the amount of the discharged debt is incorrect). If the homeowner finds any of the information to be inaccurate, the lender should be contacted immediately to correct the mistake and provide the homeowner with the new 1099-C form with accurate information.

The homeowners should use form Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness) when filling their tax return. You can get this form by going to www.irs.gov or by calling 1-800-829-3676.

If part of the forgiven debt does not qualify under this act, then the homeowner will have to prove insolvency at the time of the Short Sale transaction or Foreclosure. The homeowner will have to show that their liabilities is bigger than the assets, or file for bankruptcy. The amount that can be forgiven can go up to 2 million dollars (1 million for married couples who file separately) at the time when the loan was forgiven. Debt eligible to be forgiven are those used for building, buying or improving the principle residence and should have been secured by the property. If the homeowner refinanced for the bigger mortgage, part of this debt can also be excluded up to the old mortgage amount. The other thing about this Act is that a homeowner can not apply it to second homes, vacation homes, credit card debts, etc. This Act is design to help the homeowners who were in Foreclosure, or did a Short Sale or Loan Modification for primary residence only.

You can find more information by going to www.irs.gov or www.car.org

Ihor Pochay
REALTOR / SHORT SALE SPECIALIST
Tarbell, Realtors
Cell: (562) 334-7393
Off: (909) 629-6186 Ext. 339
Fax: (909) 629-6710
ihorpochay@tarbell.com
www.MyRealtorIhor.com