What are the top 10 myths about short sales? Many people give up hope facing foreclosure and believe a short sale isn’t possible. When in fact, short sales do indeed work. And in a variety of circumstances.
It’s an excellent solution for home owners who may be behind on their mortgage, stuck in a forbearance they can’t repay or just under market where the loan balance is greater than current values.
If you’ve heard that short sales don’t work, it’s usually based on someone’s bad experience who didn’t have the right resources. Or simply lack of information.
Outlined below find the Top 10 Myths about Short Sales that unfortunately stop home owners from reaching out for solutions:
1. Short Sales are impossible and never get approved
Nothing could be further from the truth!
In the 12 years I’ve specialized in short sales, only a handful were not successful and those were in the midst of the mortgage crisis. Many fail, that’s true. But when I look into the history of those situations it’s because the right team wasn’t in place to help the home owner.
2. Short Sales take forever
While the process is longer than a traditional sale, you can count on approximately 90 days as an average. With the right team negotiating, sometimes we can close sooner, depending on the bank.
With a strategy directed by a short sale expert, you can enter into an agreement with confidence in a smooth closing upon lien holder acceptance.
Once lien holder accepts, settlement must occur within 30-45 days depending on the bank’s terms. Within that timeframe, buyer and seller can agree on a convenient settlement date.
3. You must be behind on your mortgage to do a Short Sale
While it is true that initially some lenders wanted you to be in default (missed a payment) before they were willing to consider a short sale – this trend 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, act now! Don’t wait until the countdown to foreclosure has started and you have even less time.
4. Buyers don’t want Short Sales
This is a myth that potential sellers hear all the time. In fact many agents are getting calls from buyers who say “I only want to look at foreclosures and Short Sales!” I personally have investors who want to help home owners, and recognize this can be a positive outcome for all in a difficult situation.
Short Sales and Foreclosures have become synonymous – not with issues – but with GOOD DEALS. International buyers specifically are interested in these properties as well.
5. Listing my home as a Short Sale is an embarrassment
It is understandable that you may have reservations about letting the world know that you owe more on your home than it is worth. However, please understand we are in the midst of a national pandemic that is affecting everyone.
It’s a national crisis, not a personal failure. You are to be congratulated for admitting you need help, taking action, and finding a professional who can work with you towards a solution.
6. Banks would rather foreclose than do a Short Sale
We know you have heard this; you may have even heard it from an overzealous collections agent working for a lender. The reality is that banks do not want to foreclose on your property.
Banks do not want distressed assets on their books. It costs them less to resolve bad debt through a short sale than a foreclosure.
7. There is not enough time to negotiate a Short Sale before my foreclosure
This is a myth that probably hurts homeowners the most. Many don’t realize that foreclosure is a process and there is time.
The foreclosing party (in most cases a lender) can stall a foreclosure up to the final day of the auction. Many lenders will stall a foreclosure with as little as a phone call from you letting them know that you are trying to sell. Almost all lenders will postpone the auction date with a legitimate short sale contract in process.
8. Due to the CARES ACT, I won’t face foreclosure
Even with the moratorium on foreclosures under the COVID-19 CARES ACT, that doesn’t mean the lien holder is stopping their efforts. A foreclosure auction can happen quickly after many months, even years of no apparent action from the bank.
Taking proactive steps towards a solution before facing an auction date is the wisest choice. Don’t wait until the last minute when it might not be possible.
Unfortunately, much misinformation about forbearances has been prominent online, and from what should be trusted resources. Following bad advice about COVID forbearances has put many owners unknowingly at risk of foreclosure.
9. When I called the bank they offered a loan modification
This is one of the most confusing aspects of being in default. By law, the banks are required to offer loan modifications as an option. When home owners reach out the lien holder always says yes, even if they know it won’t apply for you. Offering this paperwork is a step in the process they are required to take, even if they know you won’t qualify.
In the short sale negotiation, our team will help you with the necessary paperwork to submit a loan modification application. To complete a short sale this is a required step.
The Real Estate Recovery Group are experts in this area, and if it’s possible they will help you get a loan modification done. However, most often this is a bureaucratic step in the foreclosure process that provides misguided hope when action towards a real solution is needed.
10. I can’t do a short sale if I have other properties or assets
I’ve helped many home owners who were given this false information. Clients who owned investment properties that were under water, luxury second and third homes and had other assets.
All of these short sale clients received debt forgiveness. As an example, one client had $400,000 in an investment account which went untouched. Another client owned 3 additional properties. Lenders cannot touch your IRA and 401K retirement accounts.
Even with additional assets, my clients did not have to contribute towards the deficiency. Debt forgiveness is always the goal with a short sale.
These can be scary and confusing situations. What’s most important to know is that help is available! Book your confidential appointment here.
Note: The information provided is for informational purposes. No legal advise is given or implied.