Distressed Property Solutions for Folsom Lake Homes
June 11th, 2009 categories: Folsom Lake Homes, Foreclosures, Loan Modifications, Short Sales
Seven Myths of Short Sales Exposed
Having just completed my designation for the Certified Distressed Property Expert (CDPE) I wanted to share more about short sales and expose some myths that you might have heard. The Distressed Property Institute recognized the need to train real estate agents to handle the current crisis and has received overwhelming approval by the National Association of Realtors in endorsing this certification. The president of Remax currently sits on their board and encourages all agents to obtain this designation.
Myth #1 -Foreclosing is easier than a Short Sale
The reality is that banks do not want to foreclose on your property because the foreclosure process is incredibly costly. Banks have all publicly stated that if a person is qualified for a short sale, the deal needs to be considered. Overwhelmingly, banks receive more on their investment through a short sale than a foreclosure. There are three pre-requisites needed to qualify for a short sale:
- 1. Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
- 2. Monthly Income Shortfall – “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
- 3. Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
Myth #2 – You Need to Miss Payments to Negotiate a Short Sale
This was the way it used to be but today lenders are looking for a verifiable hardship. If you have a monthly cash flow shortfall, a pending shortfall and show you are insolvent you meet these three requirements. If you believe that you soon may be unable to afford your mortgage, act immediately. Any delay could limit your options.
Myth #3 – There is Not Enough Time to Negotiate a Short Sale Before My Foreclosure
This probably hurts homeowners the most. Many people do not realize that foreclosure is a process, and that there is time to make decisions. The foreclosing party-in most cases a lender-can stall a foreclosure up to the final day of the process. Today, many lenders will stall a foreclosure with as little as a phone call from you explaining that you are trying to sell, and almost all lenders will stall a foreclosure with a legitimate contract.
Myth #4 – Listing a Short Sale is Embarrassing
Recent estimates show one out of five homeowners in the U.S. is in the same situation. You are to be congratulated for admitting you need help, taking action, and finding a professional who can work with you toward a solution. In our area we are seeing up to 70% of all listings on the MLS in a short sale status.
Myth #5 – Short Sales Never Get Approved
This is a complete falsehood. Are short sales more difficult to execute? Yes. Do you, as a homeowner, need to learn about a new process? Yes. Are they impossible? Absolutely not. While there are no guarantees in any transaction, more and more short sales are being approved regularly. This is far from an impossible process. Professionals who have the CDPE Designation are fully trainied in methods to help homeowners in distress and process short sales.
Myth #6 – Banks are Waiting on a Bailout and Not Approving Short Sales
The reality is that banks (and the U.S. government) are trying to do anything they can, within reason, to avoid foreclosing on properties. Denying a short sale in the hope that some future legislation would pass and pay them for losses is preposterous. 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.”
Myth #7 – Buyers Agents Are Not Showing Short Sale Properties
This is a myth that potential sellers hear all the time. Smart agents are getting calls from buyers who say they only want to look at foreclosure and short sales. For buyers, short sales and foreclosures have become synonymous with “good deals.” Listing with an experienced agent who is educated in the short sale process will provide you with a great chance of quickly seeing a contract on your property.
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Related articles:
http://folsomlakehomes.com/2009/05/06/foreclosures-fixer-scams/
http://folsomlakehomes.com/2009/04/28/short-sales-impact-on-credit-scores/
http://folsomlakehomes.com/2009/04/14/california-prevention-act/
http://folsomlakehomes.com/2009/02/16/loan-modifications-vs-short-sales/
