What is a short sale? A homeowner is considered “short” when they owe an amount on the property that, combined with closing costs and commission, is higher than the current market value.
A short sale occurs when the homeowner’s mortgage company agrees to accept less than the full balance of the loan at closing. This sounds like a very easy definition, but it actually can be an involved and time-consuming process if not handled properly.
There are many myths about short sales that must be addressed. Let’s take a look at a few myths and truths.
Myth: Your lender would rather foreclose than do a short sale.
Truth: It’s just the opposite. The foreclosure process is long and costly for the lender. Some national statistics show that on average a lender will receive 30 percent more from a short sale than a foreclosure.
Myth: I have to be behind in my mortgage payments to do a short sale.
Truth: That may have been the case in the past, but today lenders are looking for a verifiable hardship, monthly cash flow shortage or a pending shortfall. If you are facing any of these situations, call your lender immediately. Waiting will only limit your options as to what the lender may be able to do to help you.
Myth: There’s not enough time to complete a short sale before my foreclosure.
Truth: A foreclosure is a long process. In many cases a lender will stall the foreclosure process if they know you are trying to sell your house. But, they want to know you are making a real effort to get it sold. They will want proof that it is listed at a reasonable price, and they will most likely want to speak with your Realtor.
Myth: Listing my house as a short sale is an embarrassment.
Truth: There are many Americans that are in the same situation you are. Some estimates show that one out of eight homeowners is in some state of distress with their mortgage. You should be congratulated for admitting you need help and are trying to save your credit.
Myth: Short sales never get approved.
Truth: If you are upfront with your Realtor and give them all the information they need to supply to the lender, a short sale has an excellent chance to be approved. But, you need to stay in contact with your Realtor concerning any changes in your financial situation and your Realtor needs to stay in regular contact with your lender. Short sales do take more time and are more involved than a regular transaction, but if handled properly your short sale will get approved.
Myth: Buyers are not interested in buying short sale properties.
Truth: Buyers are always looking for a good deal. As with any real estate transaction, a home in good condition and properly priced will attract attention. Buyers just need to be aware of the differences between a short sale and a regular transaction.
Myth: I will have to pay back the difference of what the property sells for and how much I owed on the property.
Truth: In most cases, that isn’t the case. You will want to get something in writing from your lender saying that the difference has been forgiven. You will want to seek legal advice and speak with a tax adviser to know the legal and tax consequences.
The final thing to keep in mind is that no two cases or no two lenders are exactly alike in how they will handle a short sale.
A foreclosure is the last thing you want to happen. It will destroy your credit and change your life.
Source: http://www.htrnews.com/article/20091129/MAN04/911290357
