7 Myths of Short Sales and Preforeclosures

Rumors, rumors, rumors.  If you’re not wired into short sales, it’s easy to be misguided.  People have their own agenda, and sometimes axe to grind.

Here are some very common misconceptions:

Myth #1: Missing payments is a requirement for a short sale
You absolutely do not.  Not right now, especially when 3 out of 5 homes are being short sold.

Banks and other lenders just want to verify your hardship.  If you have more month at the end of your money, that’s all that’s needed.  If you can prove you are insolvent, that’s better.

If you think you won’t be able to pay your mortgage in the near future, now’s the time to act.

Myth #2: There is not enough time to negotiate a short sale before the foreclosure
There is always time to negotiate a short sale before the final date.  I have done it up to the final date.  Do not let time deter you.

What matters is if you have a seller in the wings.  That will definitely get the bank to stall/extend the foreclosure process.  All it takes is a contract and a phone call.

Myth No. 3: Foreclose is better than a short sale
Banks and lenders are not in the real estate business.  They are in the lending business.  THEY DO NOT WANT YOUR HOUSE.

Given the option, they’d take the short sale over foreclosure–ANY DAY OF THE WEEK.

It’s EVERYBODY’S best option right now, if you meet the criteria.

Think about this:  If given an offer for a 50 cents on the dollar short sale or 15 cents on the dollar foreclosure auction, which you you take if you were the lender?

Myth #4: You’ll lose face listing your home as a short sale
1 in 5 homeowners are in foreclosure.  You are not alone.  This is not embarassing.  This situation is not your fault.  This is reality.

In some areas over 60% of ALL MLS listings are short sales.  Believe it.

The market is going through a massive realignment in terms of value and price.

Myth #5: Short sales are difficult to get approved
When people say this, it usually implies they either haven’t done them correctly or they haven’t been trained.  There is no mystery to them!  But it does require knowledge, understanding and skill.  Experience is a huge asset.

Myth #6: Buyers agents not showing short-sale properties
Whether you are talking preforeclosures or short sales, you are talking a a good deal.  It would be crazy for a buyer agent not to totally embrace short sales right now.  There is a tidal wave of short sales.

And yes, they are more involved than a straight buy/sell agreement, but for an agent to flat out reject a short sale is doing their client a disservice, unless time is of the essence.

There are some AMAZING deals out there.

Myth #7: Banks are waiting on a bailout and not approving short sales
I have said this before and I’ll say it again.  Short sales DO take more work on everyone’s part.  But they are the best option for all right now.

Freddie Mac recently hosted a national training Web seminar for real estate agents where they specifically stated their goal was “eliminating distressed assets through modification or short sale.”

That should give you a small clue as to how receptive everyone is to short sales.

In Summary:
Jump in, the water’s fine.  Just make sure you are working with people who are experienced and have had success with the process.  Training is essential.