The Seven most dangerous Short Sale Myths
With 25 - 50% of Sarata property owners owing more on thier mortgages than the value of the property, a short sale can be an excellent solution for homeowners who must sell or face foreclosure. Unfortunately, a number of myths about short sales have developed, and it is important to understand the reality of this process should you find it meets your current needs.
Myth #1 – The Bank Would Rather Foreclose than Bother with a Short Sale
This is one of the most common misconceptions. The reality is that banks do not want
to foreclose on your property because the foreclosure process is incredibly costly.
Banks, investors, and even the federal government have all publicly stated that if a
person is qualified for a short sale, the deal needs to be considered. Overwhelmingly,
banks receive more on their investment through a short sale than a foreclosure.
The qualifications for a short sale include:
1. Financial Hardship – There is a situation causing you to have trouble affording
your mortgage.
2. Monthly Income Shortfall – “You have more month than money.” A lender will
want to see that you cannot afford, or soon will not be able to afford your
mortgage.
3. Insolvency – The lender will want to see that you do not have significant liquid
assets that would allow you to pay down your mortgage.Myth #2 – You Must Be Behind on Your Mortgage to Negotiate a Short Sale
While this may have previously been the case, today lenders are looking for verifiable
hardship, monthly cash flow shortfall, or pending shortfall and insolvency.
If you meet these three requirements and believe that you soon may be unable to
afford your mortgage, act immediately. Any delay could limit your options. Do not wait
until the countdown clock to foreclosure has started and you have even less time left.Myth #3 – There is Not Enough Time to Negotiate a Short Sale Before My Foreclosure
This is a myth that probably hurts homeowners the most. Many do not realize that
foreclosure is a process, and that there is time to make decisions that may result in
better outcomes.
The foreclosing party—in most cases a lender—can stall a foreclosure up to the final
day of the process. Today, many lenders will stall a foreclosure with as little as a phone
call from you explaining that you are trying to sell, and almost all lenders will stall a
foreclosure with a legitimate contract. For real estate professionals who understand
foreclosures and short sales, there is time available until the foreclosure process is
complete.Myth #4 – Listing My Home as a Short Sale is an Embarrassment
It is understandable to have reservations about letting the world know that you owe
more on your home than it is worth. However, according to recent estimates, more than
one out of eight homeowners in the U.S. is in the same situation. You are to be congratulated
for admitting you need help, taking action, and finding a professional who
can work with you toward a solution.
With recent estimates showing 40-60% of U.S. sales will be short sales or foreclosures,
you are not alone.Myth #5 – Short Sales are Impossible and Never Get Approved
This is a complete falsehood. Are short sales more difficult to execute? Yes. Do you, as
a homeowner, need to learn about a new process? Yes. Are they impossible? Absolutely
not. For example, agents with the Certified Distressed Property Expert® (CDPE) Designation
receive thousands of short sale approvals on a monthly basis. These professionals have
undergone extensive training in methods to help homeowners in distress and process
short sales. While there are no guarantees in any transaction, more and more short
sales are being approved regularly. This is far from an impossible process.Myth #6 – Banks are Waiting on a Bailout and Not Accepting Short Sales
You may have heard this, but the reality is that banks (and the U.S. government) are
trying to do anything they can, within reason, to avoid foreclosing on properties. It is
preposterous to believe they would deny a short sale in hopes that some future legislation
would pass and pay them for losses.
Today, more banks are aggressively pursuing short sales and working with agents who
understand how to process them. Freddie Mac recently hosted a national training
Webinar for real estate agents where they expressly stated the organizational goal of
“eliminating distressed assets through modification or short sale.”Myth #7 – Buyers are Not Interested in Short Sale Properties
This is a myth that potential sellers hear all the time. Thankfully, this is just not true. In
fact, many agents are getting calls from buyers who say they only want to look at
foreclosure and short sales.
For buyers, short sales and foreclosures have become synonymous with “good deals.”
More specifically, international buyers are targeting these properties. Listing with an
experienced agent who is educated in the short sale process will provide you with a
great chance of quickly seeing a contract on your property.
If you are intersted in selling your home, please complete the form below.
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