Phoenix Home Seller's Short Sale Myths

There is still a lot of misunderstanding about short sales out there.  Homeowners should be very careful about where information comes from, who they hire, listen to and what they do next as I see lots of people believing in myths and these beliefs, in most cases false, are putting people into foreclosure.  

Let’s take a look at a few of the short sale myths out there.

Myth One: You Need To Have Unpaid Mortgage Payments To Do A Short Sale.

There are many situations where a seller is in imminent default, but can still hang on and they are cooperating with a bank to come up with a solution.  In most cases where default is impending the lender will work with the owner despite them being current on the mortgage.  We’ve had several such cases which closed and others in the works.

Sellers may have other situation that require a short sale.  They may be transferring for a job, or have medial issues and the like.  Banks are willing to work with you.  The sooner you act the better.  Time is of the essence in the short sale.  

Some sellers who have had a short sale are able to immediately purchase another more affordable home when they were not late on mortgage payments.  You won’t be able to do this with late payments or a foreclosure.

Myth Two:  Banks Prefer To Foreclose Rather Then Do A Short Sale.

Well sometimes they do, but these days they prefer not to.  It’s really a matter of money.  A foreclosure poses lots of additional problems for the bank which they would prefer to not have to deal with and that’s besides the fact that a foreclosure can be more costly.  

In addition, banks, investors and the government have taken steps to promote short selling.  

Not everyone will qualify for a short sale and sometimes a foreclosure may be better for a property owner.

Myth Three:  Short Sale Don’t Get Approved

Yes they do.  If everything is handled well and everyone is cooperating: that means you have an experienced agent and you as the seller are fully participating then the likely hood of an approval is very high: see myth two.  

The process is often hampered by inexperienced agents and uncooperative home owners.  Please note: an agent with a special short sale designation is no guarantee, especially since some of the designations don’t require experience, they just have you take a few classes.  
There is no substitute for experience.  

But don’t discount your role.  As the seller you cannot just clean your hands and hand over the responsibility to others.   Your participation will be of vital importance to getting things done on time and at all.

Myth Four: Buyers Are Not Interested In Buying Short Sales.

There is no doubt the process was in its infancy in 2008 and 2009, but buyers are no longer avoiding short sales.  In fact short sales are over a fifth of the sold market and the bulk of them now actually close, many within 3 months: some sooner and other take longer.  Lots of buyer who have no set time to move are actually targeting short sales.

Myth Five: There Is A Stigma Attached To Selling Short

Is it worse then having a foreclosure and a bunch of trustee notices plastered on your home?  

Short sales are a normal process with much less cumulative damaging effects then a foreclosure.  You may get scorn from neighbors and friends either way, but this is you and you need to look out for you own best interest: which is better for you a short sale or foreclosure? The other thing is, you’re not alone in this hurt.

Myth Six: You’re In Foreclosure And There Is Not Enough Time For A Short Sale.

Often owners have received a notice of intent to foreclose: a trustee sale notice and they think with the tedious and long short sale process there is not enough time.  

That is wrong. Banks will often extend the trustee sale when the short sale process has started and especially when there are viable buyers with contracts ready to purchase.  Agents that know the process can often have the trustee sales postponed to complete the short sale.

Myth Seven: You Can Do A Short Sale Even If You Can Make The Payment

You cannot do a short sale just because you’re upside down.  You have to be in default of imminent default of show some other type of distress that will prevent you from keeping in terms with the promissory note.  Otherwise the short sale will not be successful.

There are lots more things to discuss about selling short.  Please fell free to call us with additional questions.