The 7 Short Sale Myths
1) Short sales rarely get approved. FALSE
TRUTH: Although short sales are difficult, acquiring or selling a home as a short sale is not impossible. More and more short sales are being approved on a monthly basis and the new HAFA guidelines should help making short sales easier to facilitate. Most importantly, it is essential to acquire the services of a short sale specialist who is experienced and knows the “ins and outs” of short sales along with systems used to make the sale a success.
2) Banks are waiting for a bailout. Thus, making it difficult to purchase a short sale or sell your home as a short sale. FALSE
TRUTH: Banks have already been bailed out and seem to be doing everything possible to avoid another foreclosure. More and more banks are pursuing short sales and agents who understand how to process the transaction. In most cases, it costs that bank 30% more to let the home go into foreclosure rather than approving a short sale.
3) You must be behind on your mortgage in order to be eligible for a short sale. FALSE
TRUTH: In the past it was very difficult to obtain a short sale approval from the bank. However, the financial institutions mindset has reversed. Today lenders are looking for verifiable hardship, monthly cash flow shortfall or pending shortfall insolvency. If you meet any of the mentioned requirements then you are eligible to sell your home as a short sale without being delinquent on your home loan.
4) Buyer are not interested in short sales and tend to avoid them like the plague. FALSE (for the most part)
TRUTH: Some buyers are not interested in short sales due to the lengthy waiting periods–especially when there are time constraints associated with the purchase similar to the First Time Home Buyer Tax Credit or Move-Up Credit. On the other hand, those that can be patient tend to obtain some very good buys–some which are sold for over 30% under current market values.
5) Selling your home as a short sale is an embarrassment. FALSE
TRUST: Most sellers would prefer that the community wasn’t aware of the financial hardships at hand. However, 1 in 5 homeowners within the United States owe more on their home then what it can be sold for. Even wealthy owners must stop the bleeding at some point. Those who sell their home as a short sale rather then letting it go into foreclosure should be congratulated. Check out my recent post which discusses this by clicking here.
6) The bank would much rather foreclose than bother with a short sale. FALSE!!!
TRUTH: The myth began in part to collection representatives working for the lender which would often state this myth in an attempt to collect the debt using companies like Bristow and Sutor (find out about Bristow and Sutor here). The realty is that banks do not want to foreclose on homes–it costs way too much. An average foreclosure costs the bank 30% more to foreclose than to facilitate a short sale due to the holding costs, insurance, realtor fees and other miscelaneus fees needed to care for and sell the home.
7) There is not enough time to negotiate a short sale before the home is foreclosed upon. FALSE
TRUTH: This myth hurts homeowners the most. The foreclosure process is lengthy. It can take up to a year (or more) for the home to be foreclosed upon by the bank. Nearly all banks will postpone a foreclosure with a legitimate contract for a short sale. A postponement can be obtained within days of foreclosure.