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The Truth about Short Sales

You may have heard that short sales take forever, don’t work and are not viable for home buyers or sellers.

In fact, short sales are an excellent solution for home owners who may be behind on their mortgage, stuck in a forbearance they can’t repay or just under market where the loan balance is greater than current values. For buyers, it can be a great resource to find the right home at your price, without as much competition.

I call those rumors “short sale myths” and like most myths, there’s an element of truth from someone’s personal experience at the source, but it’s not whole truth.

The rumor that short sales don’t work, is usually based on someone’s bad experience who didn’t have the right resources. Many people facing foreclosure give up based on bad information and believe a short sale isn’t possible.

Short sales do indeed work in a variety of circumstances with the right team working for you. For example, check out my recent successful short sale of a luxury waterfront home in Queen Village:

Susanna is one in a million in her field! In addition to her knowledge, her professionalism and ethics are of the highest caliber. I have been a real estate developer for over 35 years and found my self in a short sale situation. I have never been in this situation before but Susanna was able to get the lender to forgive a part of this loan. She is cool, calm, confident and very thorough. I would highly recommend her for any real estate transaction.

R.K, Seller

Let’s break down those common myths and look at the truth about short sales.

Top 10 Myths about Short Sales

1.    Short Sales are impossible and never get approved

Nothing could be further from the truth!

In the 13 years I’ve specialized in short sales, only a handful were not successful and those were in the midst of the mortgage crisis. Many fail, that’s true. But when I look into the history of those situations it’s because the right team wasn’t in place to help the home owner.

2.  Short Sales take forever

While the process is longer than a traditional sale, you can count on approximately 90 days as an average. With the right team negotiating, sometimes we can close sooner, depending on the bank. Once lien holder accepts, settlement must occur within 30-45 days depending on the bank’s terms. Within that timeframe, buyer and seller can agree on a convenient settlement date.

Using our strategy, you can enter into an agreement with confidence in a smooth closing upon lien holder acceptance. As an example, in a recent transaction we received lien holder approval in 45 days!

The owner was facing a foreclosure auction deadline. We aggressively got it under contract right away. That buyer walked and we re-sold it again with approval at the buyers’ price with successful loan forgiveness for the owners.

3. You must be behind on your mortgage to do a Short Sale

While it is true that initially some lenders wanted you to be in default (missed a payment) before they were willing to consider a short sale – this trend has almost all together reversed. Today lenders are looking for verifiable hardship, monthly cash flow shortfall or pending shortfall and insolvency.

If you meet these three requirements and are in a position where you will soon not be able to afford your mortgage, act now! Don’t wait until the countdown to foreclosure has started and you have even less time.

4.  Buyers don’t want Short Sales

This is a myth that potential sellers hear all the time.  In fact many agents are getting calls from buyers who say “I only want to look at foreclosures and Short Sales!” I personally have investors who want to help home owners, and recognize this can be a positive outcome for all in a difficult situation.

Short Sales and Foreclosures have become synonymous – not with issues – but with GOOD DEALS.

5. Listing my home as a Short Sale is an embarrassment

Unfortunately, the information is public whether you list your house or not. Zillow now syndicates pre-foreclosure home updates in an effort to generate buyer leads for their realtor subscribers. Don’t worry about what your neighbors might think. Let’s focus on what’s important – finding solutions for you and your family.

6.  Banks would rather foreclose than do a Short Sale

We know you have heard this; you may have even heard it from an overzealous collections agent working for a lender.  The reality is that banks do not want to foreclose on your property. 

Banks do not want distressed assets on their books. It costs them less to resolve bad debt through a short sale than a foreclosure.

Luxury foreclosure in Villanova . The bank would have netted much more with a short sale.

7.  There is not enough time to negotiate a Short Sale before my foreclosure

This is a myth that probably hurts homeowners the most.  Many don’t realize that foreclosure is a process and there is time. Add to that delays and postponements due to the CARES ACT, and a false sense of comfort is easily created. The reality is banks are working aggressively towards foreclosure behind the scenes. Even with auction delays, they are ready to take possession as soon as possible.

It’s very important to take action now! By working with our team, you are able to have much more control of the process and work towards a successful solution, rather than being at the mercy of the lien holder.

The foreclosing party (in most cases a lender) can stall a foreclosure up to the final day of the auction.  Many lenders will stall a foreclosure with as little as a phone call from you letting them know that you are trying to sell.  Almost all lenders will postpone the auction date with a legitimate short sale contract in process.

However, quick action is needed. Contact me asap if you are facing an auction date.

8. Due to the CARES ACT, I won’t face foreclosure

Even with the moratorium on foreclosures under the COVID-19 CARES ACT, that doesn’t mean the lien holder is stopping their efforts. A foreclosure auction can happen quickly after many months, even years of no apparent action.

Unfortunately, much misinformation about forbearances has been prominent online, and from what should be trusted resources. Following bad advice about COVID forbearances has put many owners unknowingly at risk of foreclosure.

Taking proactive steps towards a solution before facing an auction date is the wisest choice. Don’t wait until the last minute when it might not be possible.

9. When I called the bank they offered a loan modification

This is one of the most confusing aspects of being in default. By law, the banks are required to offer you a loan modification, even if they know it won’t be approved. Offering this paperwork is a required step in their foreclosure process, even if they know you won’t qualify.

In short sale negotiations, our team helps you with the necessary paperwork to submit your loan modification request. To complete a short sale this is a required step. If it’s possible we will get your loan modification done.

However, most often this is a bureaucratic step in the foreclosure process that provides misguided hope when action towards a real solution is needed. What’s worse is many people fall into the trap of paying for help to apply for a loan modification, only to find out they lost valuable time with no help, at a cost they really couldn’t afford.

Before you pay for consulting services, please contact me for a confidential conversation and I’ll share with you free, effective resources that work.

10. I can’t do a short sale if I have other properties or assets

I’ve helped many home owners who were given this false information. Clients who owned investment properties that were under water, luxury second and third homes and had other assets. Even with additional assets, my clients received 100% debt forgiveness.

If you have questions about whether a short sale is right for you, please contact me today for a confidential consultation.

Note: The information provided is for informational purposes. No legal advice is given or implied.

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Susanna Kunkel

Susanna Kunkel brings her experience from a career in the executive offices of major corporations to her real estate business - treating each client like a CEO. With 17 years of experience selling luxury real estate, you can be confident in knowledgeable, personalized, confidential service. Hear what her clients say - www.AskMeAboutSusanna.com

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