Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Short Sale Approved In Spite of IRS Lien for Unpaid Taxes - Here’s How We Did It

- Saturday, June 25, 2011

Our homeowner was struggling financially, following an acrimonious divorce that had him paying the mortgage on the family home, rent for his new residence, and legal fees. With these added expenses, he became delinquent on his mortgage. Due to current economic conditions, the home was worth less than what he owed on the mortgage, and he realized that a short sale would be the best way for him to cut his losses and settle his mortgage debt. Read the full case study here.

In addition to the $674,000 owing on the mortgage, the homeowner also owed money to the Internal Revenue Service (IRS) for unpaid taxes. The IRS had two tax liens on the property: one for $214,987 and another for $4,218 - in total, nearly $220,000. The home could not be sold unless these liens were lifted.

At Seattle Short Sales, Inc., nearly all of the liens that we work with are security for mortgage debt. Our case manager investigated what would have to be done to remove an IRS lien.

His first step was to obtain and fill out IRS Form 8821, which allows an individual other than the taxpayer (a "third party" - in this case, the Seattle Short Sales, Inc., case manager) to communicate with the IRS about the case as the homeowner’s appointee.

Then IRS Form 14135 was obtained, the Application for Certificate of Discharge of Property from Federal Tax Lien. In order to have IRS consider the request, Seattle Short Sales, Inc. had to provide them with information including:

  • the reason for the request (that this is a short sale)
  • a description of the property
  • a copy of the Purchase and Sale Agreement
  • a new appraisal by an independent third party
  • a statement that the seller will receive no proceeds from the sale

IRS Publication 783 provides information on how to complete Form 14135.

The IRS approved the request to remove the liens in order to allow the short sale to go ahead, and issued a letter committing to provide a Certificate of Discharge for the lien. Their conditions for issuing that certificate were: upon receipt of a payment of $1,045, as well of documentation confirming that the short sale had gone ahead. View the IRS approval letter. The Certificate of Discharge does not mean that the homeowner no longer owes the unpaid taxes to the IRS - but it does let him to get a new start in life by removing the liens on his property and allowing him to go ahead with the short sale.

The whole process took just over one month - from the day of our case manager’s initial call to the IRS requesting information on how to proceed, to their issuing of their approval letter.

Read the full case study for this short sale.

If you are a homeowner, and would like to learn more about short selling your home, please go to:

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to:

HAP Homeowners Assistance Program: An Option for Military Homeowners with Negative Home Equity

- Monday, September 20, 2010

The Department of Defense’s Homeowner’s Assistance Program (HAP) was originally designed for members of the American military who are affected by Base Realignment and Closure (BRAC). Announcement of a base closure could cause a drop in local house prices, forcing military members to take a loss on their home sale. The HAP program is authorized in Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966 (as amended), to provide financial assistance to eligible federal personnel - including military, Coast Guard, and some civilian - who are faced with losses on the sale of their home as a result of a BRAC move.

The government’s economic stimulus package, through the American Recovery and Reinvestment Act of 2009, modified the plan to what is known as “Expanded HAP”. The new “Expanded HAP” makes more military members and civilians eligible for assistance by including those undergoing a Permanent Change of Station (PCS) move. It also removes the requirement to prove that the house price decline was a result of the BRAC announcement.

The HAP program helps military members to sell their home and make their move, without having to go to their lenders to try to have a short sale approved.

The new Expanded HAP program is open to:
- Wounded members of the Armed Forces (30% or greater disability) and wounded Department of Defense (DoD) and Coast Guard civilian homeowners reassigned in furtherance of medical treatment or rehabilitation or due to medical retirement in connection with their disability,
- Surviving spouses of the fallen,
- Base Realignment and Closure (BRAC) 2005 impacted homeowners relocating during the mortgage crisis, and
- Service member homeowners undergoing Permanent Change of Station (PCS) moves during the mortgage crisis.

Who can apply:
The HAP program is undergoing on-going amendments, as the government works towards finding ways to help distressed military homeowners in the current unpredictable and changing economic climate. It is best to contact HAP directly (contact details below) to get advice specific to individual situations.

General guidelines to qualify for HAP assistance for those applying as a result of a PCS move are:
- they must be active-duty military personnel
- the PCS move must be greater than 50 miles, with PCS orders dated between February 1, 2006, and September 30, 2010 (closing date is subject to availability of funds)
- the home must have been their primary residence at the time the move was announced
- county, parish and city home values must have dropped by at least 10% between July 1, 2006, and the HAP application date; and the individual home value also must have dropped by 10% between the date of purchase and date of sale.

Current regulations are that the home must have been under contract to purchase prior to July 1, 2006. Many military members purchased their homes just after this cut-off date, and an amendment under discussion may open the program to homeowners who purchased after this date.

Guidelines for applicants eligible as Wounded, Injured or Ill and Surviving Spouses are slightly different, e.g. the requirement to purchase the primary residence prior to July 1, 2006 does not apply.

HAP provides assistance to military homeowners faced with selling their home at a loss in a number of different ways. The exact ways that HAP may help depend upon which eligibilty requirements the homeowner applies under. For those who are applying as a result of a PCS move, HAP may help by:
- if foreclosure is taking place, providing financial assistance after foreclosure by paying some of the expenses,
- if a private sale is taking place at a loss, reimbursing 90% of the difference between the purchase price and the sale price, plus closing costs,
- if a home sale cannot be negotiated within 120 days, purchasing the home directly by paying either 75% of the purchase price or by paying out the mortgage, whichever is greater (HAP will not reimburse or pay out second mortgages).

How to apply:
Contact your nearest HAP office or visit the HAP website from application forms. A complete HAP application package must include:
- Form HUD-1 - proof of home purchase
- Proof of ownership - copy of deed
- proof of occupancy at time of receipt of PCS orders (e.g. utility bill)
- proof of program eligibility

Important things to know when applying for HAP:
1. You must be actively marketing your home, and seeking to sell it at Fair Market Value.
2. HAP does not reimburse the full negative value of your property, but a percentage that ranges between 75% and 95% of that negative value.
3. HAP applications are processed in chronological order that the completed applications are received. Incomplete applications will be ignored until all documents are in order, so it is very important to make sure that your application is complete. Order of processing priority is by eligibility: (1) Wounded Injured Ill and Surviving Spouse, (2) BRAC 05 moves, (3) PCS moves.
4. A member may receive benefits only once through this program.
5. As of November, 2009, HAP benefits are no longer taxable.

HAP website:
DoD HAP National Hotline: 1-888-363-4271
General HAP brochure:
Expanded HAP info brochure:
Online discussion forum:

If you are a homeowner, and would like to learn more about short selling your home, please go to:

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to:

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