Common Myths About Short Sales

Short sales have become very common and can be an excellent solution for homeowners who must sell and owe more on their homes than they are worth. A number of myths have developed about short sales and it is important to understand the reality of this process if you are going to be dealing with a short sale in any way.

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. In more cases than not, banks receive more on their investment through a short sale than a foreclosure.

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, you should act immediately. Any delay could limit your options. Do not wait until the foreclosure process 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 homeowners do not realize that foreclosure is a lengthy 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. 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 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
Short sales more difficult to execute; but not impossible. Homeowners faced with a short sale should be prepared to learn about a new process and should be sure that they work with an agent that is familiar with the process.

For example, agents with the Certified Distressed Property Expert® (CDPE) Designation have undergone extensive training in methods to help homeowners in distress and process short sales. These professionals receive thousands of short sale approvals on a monthly basis.

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 – Buyers are Not Interested in Short Sale Properties
This is a myth that potential sellers hear all the time. Thankfully, this is 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.” Many nternational 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.