This has truly been an exciting year for our local Board!  It seems as if just a short time ago I was installed as your 2007 President, and now I am preparing to pass the gavel to my successor Victoria Doran on October 26th at our State-wide Installation of Officers and Directors.

As I review this past year, being Board President has been a wonderful opportunity for me to get to know my fellow REALTORS® better, to hear and respond to your comments and feedback from the field, and to develop lasting relationships with my peers. This would not have been possible without taking the first step: I volunteered.     

When I was first asked to serve as a volunteer on the Greater Providence Board of REALTORS® I recall how humbled I was to be a part of such an amazing team. We are truly fortunate to have volunteers with incredible energy and talents who are willing to share their time with our Board. I whole heartedly urge anyone who is serious about our profession to get involved!  If you would like more information on volunteer opportunities you can find it under the Quick Links section of this newsletter.

I would also like to acknowledge the contributions of our Affiliate Members.  Our Affiliate Members are comprised of professionals from the real estate industry who have recognized the importance of building relationships with REALTORS®.  I would like to personally thank those Affiliates who give their support to the Greater Providence Board of REALTORS®. Their sponsorship of our programs goes a long way in allowing us to continue to provide high quality programs and services at a reasonable cost. 

In concluding my term as your 2007 President, I look forward to a bright future for the Greater Providence Board of REALTORS®.  I would like to take the opportunity to thank you, the members, for giving me the opportunity to serve this Board.  I would also like to express my gratitude to the volunteers and Affiliates who have given their time and resources to support our continued success.  It has been my privilege to represent you and I am inspired to continue my service in any way that may be meaningful in promoting our shared goals as REALTORS®.

Best Regards,

State-wide Installation Gala to be held on October 26, 2007

SHORT SALES AND THE "PHANTOM TAX"

            In today's atmosphere of tightened lending standards and challenging market conditions, "Short Sales" and "Quick Sales" are becoming much more prevalent in the current housing market.  From a Listing Agent's perspective, in order to effectively channel your marketing and resources in this tumultuous market a successful REALTOR® must first be able to determine if either a "Quick Sale" or a "Short Sale" is the best solution for the client. 

            A "Quick Sale" is defined as the sale of a piece of property that has equity in it, in other words it has a value greater than its outstanding mortgages and liens.  In this situation the seller/client and REALTOR® make an informed decision to market the property at a discounted price in order to effectuate a speedy sale to avoid foreclosure proceedings, further market value reductions or to secure funds to purchase another home. 

A "Short Sale" on the other hand is defined as a piece of property that has a value less than its outstanding mortgages or debts.  In order to successfully effectuate a "Short Sale" the REALTOR® must secure an agreement with the seller's lender wherein the lending institution agrees to accept a final payoff that is less than the amount owed for full satisfaction and discharge of the mortgage.  The amount of the loan that the lender agrees to reduce is either forgiven or converted to a personal loan.  Remember, when discussing options with your client a "Short Sale" is not the same as a foreclosure sale or a bank REO property sale.

The downside of a "Short Sale" for your client is twofold.  First, the lending institution granting the short payoff reserves the right, and in most cases, will report the short sale to the credit bureau as "Foreclosure redeemed, short sale settled."  Clearly, this will have an impact on your client's ability to secure a mortgage/loan at some future time.  Secondly, your client will have to deal with what is commonly known as the "Phantom Tax."  This tax is not a phantom at all it is actually the 1099 tax.  In most cases, when a lender agrees to take less on a payoff than is actually owed, the lender will report the reduction in the loan amount to the Internal Revenue Service.  Their rationale is that since your client was initially given the loan's full value, any amount forgiven and not paid back is deemed to be income in the year in which it was gained and the seller owes taxes on it.

In conclusion, it is imperative for the real estate professional to be able to distinguish between a "Quick Sale" and a "Short Sale" and properly inform one's clients about the potential tax and credit ramifications on the latter.

• 2007 Code of Ethics
• Proper use of the REALTOR® Trademark
• REALTOR® Dues Formula

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