Short sale doc stamp problems causing angst at closing time
March 10, 2009
TALLAHASSEE, Fla. – Sept. 3, 2008 – Should documentary stamp taxes levied against a short sale be based on the sale amount or on the sale amount plus money forgiven by the original lender? It’s a simple question without a simple answer, and it impacts closings in Florida.
The problem is fairly new, and arose with the large number of short sales. Florida law does not clearly state whether the doc stamp taxes owed on a deed should be based on the sale price paid by the purchaser, or on the sale price plus any existing debt forgiven by the bank. Consequently, local governments make their own decisions and charge different amounts.
The Florida Association of Realtors (FAR) contacted the Florida Department of Revenue (DOR), the Attorney General’s office and the governor’s office when the problem became clear. As the dispute intensifies, it could shut down some closings and impact an already soft real estate market.
“Meetings with officials have continued,” says FAR Public Policy Representative Trey Price. “Last week, FAR had a two-hour meeting with eight DOR personnel, including both the head of the agency and the general counsel.”
Some local government officials and others within the real estate community mistakenly think the issue has already been decided, based on a widely circulated one-page letter on DOR letterhead that claims doc stamps are due on the higher amount.
But a top DOR official says, “No official position has yet been issued by the department.”
FAR officially requested a Technical Assistance Advisory (TAA) with DOR, which would provide Realtors a specific document to explain the short sale doc stamp procedure. Bob McKee, deputy executive director of the agency, adds, “We anticipate that official position to be taken very soon in the form of the TAA requested.”
While FAR hopes that an outcome favorable to all parties will occur (an advisory using the lower amount), Price warns that an unfavorable outcome is possible. “FAR is prepared for that outcome as well, including exploring possible ‘amnesty’ avenues the Florida Legislature could enact to protect earlier short sale transactions.”
FAR received notification yesterday that the TAA should be available soon. “Advisories can sometimes take months or even a year before a conclusion is made, so the DOR expediency illustrates their understanding of the importance of this issue,” says Price.
FAR will continue to follow the short sale problem and keep members informed of any updates.