Short Sale Myths
The lack of positive/correct information can be daunting for a homeowner facing the difficult decision of selling their home when they owe more than it is worth. We created this website to help answer questions that you or someone you know may have regarding a short sale. Understanding in depth information on the short sale process and how you can give yourself the best odds of getting to the settlement table. Below are some myths about Short Sales.
Myth 1- I must stop making payments before bank will approve a short sale
You do not have to stop making payments on your home in order for the bank to approve a Short sale . What the bank need to see is a solid reason why you are unable to continue making your monthly payments and /or must sell (loss of job, relocation, divorce, etc.) Due to current market conditions the banks generally understand why the short payoff is being requested, whether you missed payments or not.
Myth 2- The bank will not pay the commission for my Real Estate Agent and/ or the costs of listing the property with a real estate agent will be passed on to me.
A real estate agent commission is taken ot of the banks proceeds at close of escrow.
Myth 3 – I have two mortgages…there is no way I can do a Short Sale.
When the short sale process was just beginning, many people did not try a short sale if they had a second trust that was going to be shorted. After the huge wave of foreclosures, 2nd trust holders wised up. Now instead of foreclosing on a property and receiving $0, they have started to accept pennies on the dollar…which is better then getting nothing. In situations when the first is also going to be shorted, the 2nd will usually ask for a low dollar amount from the first or from the seller. Usually a repayment plan can be worked out that is very favorable to the seller
Myth 4 – I should never accept a payment plan from the bank…they should forgive all my debt.
Let me tell you a story…seller gets his home sold as a short sale. Offer goes to the bank and finally gets to BPO time. First trust accepts the payoff…2nd trust comes back and asks for $10k to be paid over 5 years with a 5% interest rate. Seller says no way he wants to pay nothing…2nd rejects the sale, buyer walks away, home ends up in foreclosure. All over a $200 monthly payment in place of a $4,000 mortgage. If it makes sense, why would you not solve the problem with a simple solution like this?
Myth 5 – Pricing the home lower will create a buzz and build contracts to submit to the bank.
Most buyers are still of the mindset that they should not pay over asking price. Most short sales fall apart because the home was under priced and the bank wants the sale to be close to Fair Market Value. If you list the home for a fair price and prove to the bank that the home was “Seasoned” it increases the odds that the offer will be accepted.
Myth 6 – Short Sales do not get accepted.
At the end of last year, the numbers showed that about 10% of short sales were accepted. Since then, agents have started to learn what the banks are looking for, and banks have started to realize that a short sale is the best alternative in a foreclosure situation. Agents who have a plan and a system in place are having a huge success in getting their short sale accepted. In the right hands, a short sale can be presented to the bank as the only solution. Make sure that you contact a CDPE which is the industry designation for agents with specialized training for short sales.
Myth 7 – A Short Sale is embarrassing…a black cloud will be hovering over our house.
A Short Sale is a regular sale! There is nothing different in the way that you as a seller prepare to sell your home, and we as the agents list and market your home. We do not advertise our listings to the public as a Short Sale…what advantage does that bring to you? There are requirements to advertise in the remarks to agents that the home is a short sale, but that is only to help them counsel their clients on the process. Short Sales happen to people with good jobs making good money. It simply is a situation where you must sell and do not have the means to make up the difference. You should never feel or be made to feel embarrassed about the situation.
Myth 8 – Any agent can list a short sale.
Amazing that agents listed short sales for clients in trouble to learn on the fly. The fact of the matter is that most agents do not have a system or plan in place to list a short sale. To give you an example, our area of expertise is buying and selling property. We have a specific pre-listing system for short sales, and a tailored marketing plan that assists in the short sale being accepted. It basically gives the banks what they want to see in a home sale. We hire attorneys to represent our clients in negotiating the terms of the short sale – at no expense to you. That is their area of expertise. See it’s not about us advertising that we successfully negotiated short sales…it’s about giving our clients the best chance to move on.
