A short sale can be an excellent solution for homeowners who must sell and owe more on their homes than they are worth.  Unfortunately, a number of myths about short sales are out there, and it is important to understand the reality of this process should you find yourself in this situation.

Myth #1 – The bank would rather foreclose on my home than bother with a short sale.

This is one of the most common misconceptions.  The reality is that banks do not want to foreclose on your property because the foreclosure process is very costly for them.  Banks and the federal government have both stated that if a person qualifies for a short sale, the deal needs to be considered.  Banks recover far more on their investment through a short sale than a foreclosure.

Myth #2 – You must be behind on your mortgage to negotiate a short sale.

While this may have previously been the case, today lenders are looking for verifiable hardship, monthly cash flow shortfall, or pending shortfall and insolvency.
If you meet these three requirements and believe that you soon may be unable to afford your mortgage, act quickly.  Any delay could limit your options. Do not wait until the countdown clock to foreclosure has begun and you have even less time left.

Myth #3 – There is not enough time to negotiate a short sale before my foreclosure.

This is the myth that probably hurts homeowners the most.  Many do not realize that foreclosure is a process, and that there is time to make decisions that may have better outcomes.
The lender can postpone a foreclosure up to the day of the auction.  Most lenders will do this with as little as a phone call from you explaining that you are trying to sell, and almost all lenders will postpone the sale with a purchase contract for the home.

Myth #4 – Short sales are impossible and never get approved.

This is completing FALSE! The lenders have finally caught on and have made efforts to streamline the process, hired more staff to handle the increased volume and have final realized that they recoup more money completing a short sale rather than foreclosing. Currently we are getting short sales approved in 30 to 90 days.

Myth #5 – Banks are waiting on bailout money and not accepting short sales.

You may have heard this, but the reality is that banks (and the US Government) are trying to do anything they can, within reason, to avoid foreclosing on properties. It is crazy to believe they would deny a short sale in hopes that some future legislation would pass and pay them for losses. Today, more banks are aggressively pursuing short sales and working with agents who understand how to process them. Freddie Mac recently hosted a national training Webinar for real estate agents where they expressly stated the organizational goal of “eliminating distressed assets through modification or short sale.”