For homeowners who owe more on their mortgage than their home is worth, a short sale can be a great option. During negotiations, a short sale can eliminate deficiency liability and allow the homeowner to remain in their house for a longer amount of time. Sadly, there are a lot of false beliefs and myths regarding short sales that deter homeowners from obtaining that protection or trick them into hiring a real estate agent without legal representation.
Are you facing financial hardship and wondering if a short sale is the right option for you? Many homeowners are hesitant to pursue this route due to common misconceptions and myths surrounding the process. In this article we’ll debunk these myths and provide you with accurate information to help you make an informed decision.
Myth #1: Banks prefer foreclosure over short sales.
Reality: Contrary to popular belief, banks actually benefit more from short sales than foreclosures. While the bank may receive less money upfront in a short sale they avoid the time-consuming and costly foreclosure process. Additionally, short sales allow banks to recover a larger portion of the debt compared to foreclosures which often result in significant losses.
Myth #2: You must be behind on your mortgage to qualify for a short sale.
The truth is that you can pursue a short sale without being in default on your mortgage. If your circumstances have changed and you are unable to continue affording the property, you might still be eligible even if you are up to date with your payments.
Myth #3: There’s not enough time to negotiate a short sale before foreclosure.
Reality: While time is of the essence, it’s crucial to work with an experienced professional who can navigate the process efficiently. A skilled attorney or realtor can negotiate with the bank and obtain extensions to prevent foreclosure while working towards a successful short sale.
Myth #4: Short sales are rarely approved.
Reality: The proficiency of the person managing the process has a significant impact on the success rate of short sales. Traditional real estate brokers frequently lack the requisite training and experience, which contributes to their high failure rate. But with the help of a lawyer or real estate agent with experience in short sales, the approval rate rises dramatically.
Myth #5: Buyers aren’t interested in short sale properties.
Reality: The uncertainty surrounding short sales handled by traditional agents is the source of this myth. However, buyers are more assured of the transaction’s success when it is handled by a knowledgeable lawyer or realtor. Additionally, because the purchase price is typically lower for short sales, buyers find them to be appealing opportunities.
Myth #6: Not showing the home or signing an offer slows down the process.
Reality: The opposite is true. Engaging the lender early in the process is crucial to securing extensions and postponing the foreclosure sale. The bank’s slow processing time often allows for multiple offers on the property, increasing the chances of a successful short sale.
Myth #7: You need a local agent to sell your property in a short sale.
Reality: While local agents may have knowledge of the area, their expertise in short sales is often limited. An attorney or realtor specializing in short sales can effectively represent you regardless of location, ensuring the highest chance of success.
Myth #8: There’s no cost to working with an attorney or realtor for a short sale.
Reality: While some attorneys or realtors may offer free consultations, it’s important to understand the associated fees. However, the benefits of their expertise and experience often outweigh the costs, especially compared to the potential losses incurred through foreclosure.
Don’t let misconceptions deter you from exploring a short sale as a potential solution to your financial challenges. By working with an experienced attorney or realtor, you can navigate the process effectively and increase your chances of a successful outcome. Remember, seeking professional guidance can save you time, money, and unnecessary stress during this difficult time.
Myth: You must be behind on your mortgage to complete a short sale
It’s not necessary to be in default in order to complete a short sale, though it may be the only option if your loan is unaffordable. In Southern California, we have successfully closed several short sales in which the homeowner is still making mortgage payments on time. Even if you are current on your mortgage, I can get through to the bank as an Attorney/Realtor® and have them open a short sale file. Additionally, you need the assistance of an attorney in presenting your situation in the hardship letter. You don’t want to say the wrong thing and kill your chances of obtaining a short sale.
Myth: Short sales are impossible and never get approved
If you work with a traditional real estate agent, this statement is generally true. According to the data, most short sales that are managed by a conventional real estate agent or a short sale “expert” end in failure. But when you work with an Attorney/Realtor®, you get the strength of California law in addition to complete and total representation. This allows a near 100% success rate on our short sales. Only in the most desperate situations are we not able to complete a short sale (i. e. extensive IRS or FTB liens on the house, three or more loans on the property, or environmentally damaged land) Please see our article on “So-called short sale experts” at www. LawyersRealtyGroup. com.
Why do banks prefer foreclosure to short sale?
Should you buy a short sale home after a foreclosure?
Short sale homes are also often in better condition than homes that you’ll encounter later in the foreclosure process. Short sale owners are likely to be short on funds and unable to fund needed repairs. But because it’s still relatively early, the deferred maintenance may not have accumulated so much.
Do banks lose more money on a short sale than a foreclosure?
Generally, banks lose more money on a short sale than on a foreclosure, but there are still times when a short sale is a better option. Sometimes the process of foreclosure is more expensive and involved than the bank wants to handle. If the short sale price is close to market value, the bank will be more likely to accept that offer.
Why should a home seller avoid a foreclosure?
This helps the home seller by allowing them to avoid foreclosure, which is typically more damaging to a credit report than a short sale. A foreclosure is when a home is seized and put up for sale by the mortgage lender or bank.
Why do some Lenders accept a short sale instead of a foreclosure?
Some lenders accept a short sale instead of moving forward with a foreclosure because short sales can result in smaller losses for the lender and/or a faster way for them to get rid of REO property (bank-owned property). Homebuyers have an interest in short sales because they can sometimes purchase real estate at a lower than normal sale price.