Short Sale BUYERS May be Responsible for Doc-Stamps
Many of you have heard or seen reports that the State dept of Revenue for purposes of determining the transfer tax (stamps on the deed) will base the tax on the sale price + the amount of forgiven debt on the mortgage. So if a property with a mortgage of 300,000 sells for $200,000 the tax would be $2,100 (SP 200,000 + debt forgiven 100,000 X .007). This policy is not in effect now as a final decision from the Dept of Revenue is not expected for several weeks. However, here’s the kicker so please pay close attention. If the above ruling is issued and a deal closes and the tax on the debt that was forgiven is not paid the State will look to the BUYER for payment. The tax, although normally paid by the seller, may be paid by either buyer or seller so both are liable and it is much easier to find the Buyer as they can usually be reached at the property they purchased. The seller on the other hand may have left the state and it could be difficult to track them down. Any buyer pursuing a short sale needs to make sure the closing agent is calculating the tax using the total amount of the mortgage debt as the basis and make sure the lender authorizing the short sale agrees to pay the full amount.