First, a disclaimer. I cannot stress this point enough: consult your attorney, your CPA and your real estate professional to ensure you fully understand all ramifications of a short sale.
If you must sell your home and owe more than it is worth to sell, a short sale may be an alternative. Several myths have evolved over time, so it’s imperative to understand the realities of your situation. Short sale myths include:
- Short sales are impossible and never get approved. Short sales are more difficult, but not impossible. They don’t happen over night.
- Banks don’t accept short sales. In reality, most banks will do all they can to avoid a foreclosure.
- You must be behind on your mortgage to negotiate a short sale. Many lenders focus on verifiable hardship, monthly cash flow shortfall and insolvency; not just people in default.
- Buyers avoid short sales. Some agents report that buyers are actively looking for short sales.
- Listing your home as a short sale is embarrassing. Recent figures show that 1 out of 5 U.S. homeowners face this situation, so it’s more common than you think.
- Banks prefer to foreclose. Banks do NOT want to foreclose. Banks, investors and the federal government have all publicly stated that if a person qualifies for a short sale, the deal should be considered in good faith.
- There is not enough time to negotiate a short sale before my foreclosure. Many lenders will halt a foreclosure up to the final day of the process, with a legitimate contract.
