Myths About Short Sales
- The bank would rather foreclose than work with a short sale. FALSE. Foreclosing on a home is very costly to a lender because:
They have to pay trustees & attorneys to go through the legal process of the trustee sale
After the sale, they assume all the legal and financial responsibilities of owning a home
The property may get trashed during homeowner move-out or during the selling period
In some cases, they have to pay foreclosed homeowners to vacate the property
The government is placing indirect influence on banks to keep properties out of foreclose
A financial hardship is required for short sale approval. FALSE. A hardship caused by non-financial reasons is acceptable hardship to most banks. Furthermore, most people don't realize that a financial hardship doesn't always mean loss of a job. A reduction in income also qualifies as a financial hardship.
Banks can still seek a deficiency judgement after the short sale. FALSE. Lenders may approve short sales without the forgiveness of debt, but we not recommend accepting such an offer. Front Line Realty short sales are not successful unless the lienholder agrees to waive all rights to pursue a deficiency judgement, and all our client's approval letters have conntained this waiver.
There is not enough time to negotiate a short sale before foreclosure. FALSE. Because banks are trying to avoid the costly process of foreclosure, they are willing to postpone the sale date in order to solicit a short sale offer. We have postponed trustee sales the day before the actual sale. Because each bank has different policies, don't wait until the last hour before contacting us for help.
Making too much money disqualifies me for a short sale. FALSE. Here's a simple scenario: 1 million dollars of income - 1.1 million dollars of expenses = qualification for short sale. No matter how much you make, if your outflows exceed your inflow, you are on a sinking ship and are experiencing what the banks consider a hardship. Furthermore, no matter how much you make banks are always willing to negotiate because they know that foreclosure is extremely expensive.
You have to fix up your home before short selling it. FALSE. Short sale homes are sold AS-IS, meaning no repairs are required. There WILL be maintenance costs such as keeping your HOA and utilities current, and but the traditional cost of pre-sale fixups are gone.
You have to pay realtor commissions and negotiation fees to short sell. FALSE. Commissions are paid by the bank in short sale transactions. Unlike other real estate brokerages, Front Line Realty does not charge negotiation fees to either the seller or buyer.
Short selling my home is unethical. FALSE. 4 reasons why short selling is NOT unethical.
The loan between you and the bank is a business transaction governed by contracts, statutes and law. A short sale is simply a business decision to eliminate an unproductive asset.
The loan was based on the property value, which the bank determined. The bank was incorrect on their assumptions on the property value, and short selling aligns the new loan amount to the current property value.
Banks are part of the system that caused and perpetrated the current economic meltdown. You are not expected to shoulder ALL of their mistakes, which include funding loans they never should have even considered.
- The teaching of "Always keep your promise" is meant to set young minds on the right path. The ethics of law, business and life are significantly more complex than that, where survival, safety, and utilitarianism play a large a role in determining what is right and wrong. If short selling is about financial survival for your family, then by all means do the right thing and survive.
Short sales are very difficult to get approved. FALSE. With an inexperienced agent, this may be true; however, we have a great track record of closing short sales. Based on our free assessment of your situation, we can tell you how likely your sale will be accepted by the lender.
You must be behind on your mortgage to be approved for a short sale. FALSE. Some banks have approved short sales without the borrowers being late. However, a successful short sale WILL negatively impact your credit equivalent to a severely delinquent account.
Buyers are not interested in short sale properties. FALSE. Buyers are interested in short sales because they provide the best values in the current market. Short sale homes are typically occupied and taken care of, while bank owned homes deteriorate in the hot sun without power and utilities.
All real estate agents are qualified to give me short sale advice. FALSE. Only agents trained and experienced in closing short sales are qualified to give short sale advice. Beware of anyone who tells you that a short sale can not be done. They are likely to be unqualified or worse, ignorant.
Contact us to discuss these short sale misconceptions and how it may apply to your situation.