There are 7 myths being circulated about short sales.
1) Short Sales are impossible and never get approved. FALSE
TRUTH: Short Sales are more difficult, There is a need to learn a new process but they are NOT impossible. While there are no guarantees in any transaction, more and more short sales are being approved monthly. However, an agent MUST be educated on the process, or it will be nearly impossible.
2) Banks are NOT accepting Short Sales, they are waiting on a bailout. FALSE
TRUTH: The reality is that banks have already been bailed out, and are really trying to do anything they can, within reason, to avoid foreclosing on a property. More banks are aggressively pursuing Short Sales. It is strictly business. It costs the bank (in most cases) far less to short sell than to foreclose.
3) You must be behind on your mortgage in order to negotiate a short sale. FALSE
TRUTH: At one time this was true, but today, this has almost all together reversed. Today lenders are looking for verifiable hardship, monthly cash flow shortfall or pending shortfall and insolvency. If you meet these three requirements and are in a position where you will soon not be able to afford your mortgage, now is the time. Some few lenders still hold on to this rule, but they are few and far between. In fact, most lenders in any circumstance would rather sell short than foreclose.
4) Buyers are not interested in short sales and avoid them. FALSE (mostly)
TRUTH: Some buyers are not interested because of the time it takes, especially with time constraints like the first time homebuyer credit. On the other hand, many buyers say “I only want to look at foreclosures and short sales.” These have become synonymous, not with issues, but with Good Deals.
5) Listing a home as a short sale is an embarrassment. FALSE
TRUTH: Most sellers don’t want the world to know they can’t pay their bills, but according to recent estimates, 1 in 5 homeowners in the US owe more on their house than it is worth. Even wealthy owners have to stop the bleeding somewhere. Most sellers are to be congratulated for admitting they need help, taking action and finding a professional who can work toward a solution.
6) The bank would rather foreclose than bother with a short sale. FALSE FALSE FALSE!!
TRUTH: This myth started with collection people working for lenders on commission. The reality is that banks do not want to foreclose on property, it costs too much. An average foreclosure can cost the bank up to $40,000 and they still have holding costs, insurance, realtor fees, etc. and still get less than market value. Do the math, which would you do?
7) There is not enough time to negotiate a short sale before a foreclosure. FALSE
TRUTH: This is a myth that hurts homeowners. Many don’t realize that the foreclosure process is lengthy. It can take a year or more, and if an attorney gets involved, it can be stalled far longer. Almost all lenders will stall a foreclosure with a legitimate contract for short sale. So if lis pendens has been filed, no worries, that’s just the beginning. If it is slated for the courthouse steps, hurry up, if there is an offer you may be able to stall.
Source: Abridged from Broker Agent Social. January 2010
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