With short sales making up a significant amount of current listings in our area and nationally, it's important to understand the short sale process and talk about some of the myths surrounding these transactions, especially if you are considering a short sale on the sale of your home:
1. You must be in default on your mortgage, or have missed mortgage payments to negotiate a short sale. Short sales are the result of the bank weighing their options and trying to mitigate a potential default situation that, in the long run, will cost more money to the investors if the home goes into foreclosure. When I reference investors it refers to the actual owner of the mortgage as many banks are only servicing the loan and it's not a part of their loan portfolio.
2. Listing your home as a short sale is embarrassing. Let's face it, this is not an easy situation to be in for anyone. It is important to keep in mind that the most critical element is to get proper advice from a knowledgeable real estate agent, CPA and possibly an attorney. Know your options and weigh them carefully, but do look at them as waiting until your home goes into foreclosure may bring far worse consequences than a short sale.
3. Short sale properties are difficult to sell. Short Sale properties are not for the weak as they often involve a long timeline, anywhere from 5-12 months and some emotional ups and downs along the way. On the plus side short sale properties can be very well cared for and have not had to endure the deferred maintenance of a REO property, so they are attractive to many buyers. While some buyers shy away from short sales, many are finding that the wait is worth the end result.
4. There's not enough time to negotiate a short sale before foreclosure. The answer here is, it depends and many times the foreclosure process can be stopped or paused while the short sale is being negotiated. The only way to know for sure is to try.
5. The bank would rather foreclose than complete a short sale. Banks do weigh their options, as I mentioned earlier the bank may stand to lose significantly more going through the foreclosure process. Once the bank owns that property as an REO they will need to carry it on the books until it is sold.
6. Short sales are impossible and never get approved. Short sales are complicated, but not impossible. I personally have had short sale approvals over the last year and can say that while not easy, they can be achieved.
If you are thinking about selling your home and you are considering a short sale, be prepared to be honest and completely transparent about your financial situation, in order for you to get appropriate advice. Short sales can be difficult psychologically, but may be a good option. My advice is to choose an agent that has the proper training and understands how to navigate the process.
Hi Ana, great post. I have had pretty good luck with short sales. Just being upfront with the buyers will make for a much more pleasant transaction and most importantly make a friend with your negotiator.
The important thing is to get professional help early.
Thanks for such an insightful posts. Its true most of the areas you pointed out are myths and homeowners need to be better educated about the short sale process