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Top 10 Myths about Short Sales

Short sales are a segment of real estate that is widely misunderstood and poorly represented. Often I hear negative comments from real estate agents that are actually just self fulfilling prophecies. Meaning that short sales fail primarily due to the people involved not being experienced specialists. It’s an extremely viable strategy to stop foreclosure and save credit for homeowners, and a good opportunity for buyers. Learn more:


The process is completely different from a “normal” real estate transaction and there’s very little training available for real estate agents or brokers. However, you can create success by having the right team to assist you.

After you read this article, let’s talk! I’ll connect you with the right people for your situation, locally or across the country.


Let’s “debunk” the 10 most common myths about Short Sales:

  1. Short Sales don’t close; they do take longer, but can be very successful! I personally have a 99% success rate. The ones that have failed were not due to the process, but to the principal parties involved not being willing to do what they needed to in order to succeed.
  2. Banks want to foreclose vs. approve a short sale; while it might feel like the banks really want to take your home as they do act quickly and aggressively, lien holders prefer a short sale solution vs. taking ownership through foreclosure. Interviewing asset managers directly, it’s clear that most lenders do not want to have delinquent inventory on their books. It costs them more to finalize a foreclosure than to resolve a short sale successfully.
  3. If there’s an auction scheduled, I can’t do a short sale; while there may be time limits, often we can successfully postpone the auction to enable a short sale to be successfully completed. My negotiator and I successfully did this for a home owner recently, and closed the short sale with debt forgiveness in 45 days!
  4. A short sale will hurt my credit just like a foreclosure; many homeowners feel hopeless due to the damage to their credit by being in pre-foreclosure. A short sale isn’t recorded on your credit profile like a foreclosure is. Short sale debt forgiveness may or may not be recorded on your credit report. If it is, usually your credit can fully recover within 2 years. A foreclosure is formal and shows on your credit report for 7 years. In addition, many credit applications and security clearances will ask if you’ve ever filed bankruptcy or had a foreclosure.
  5. I own other properties and have assets, the bank won’t forgive my debt; while everyone’s situation is different, you can own multiple properties and still get approval for a short sale. While your lien holder will want to see a hardship explaining why you can’t pay the mortgage, many clients of mine have received debt forgiveness without having to contribute to the deficiency, even with substantial assets. Also, retirement accounts like 401K’s and IRA’s are protected.
  6. I can’t afford to pay for a short sale; as a distressed home owner, the short sale will not cost you anything! You are obligated to maintain your home during your ownership up to settlement. However, you won’t be required to pay ANYTHING for the short sale. The professional negotiation fee is paid either by the buyer, or deducted from the seller (lien holder’s) proceeds. Similarly, commissions, taxes, etc. that are normal seller costs are deducted from the lien holder’s proceeds. The bank pays for your sale, not you!
  7. I won’t be able to get debt forgiveness; this is the biggest fear for distressed sellers, and some won’t take action unless they feel a guarantee of debt forgiveness up front. Unfortunately this cannot be guaranteed, and debt forgiveness for the seller is part of the bank’s response in the final phase of short sale negotiations when they issue an approval letter for the buyer’s offer. When we receive the lien holder’s response to the offer, if debt forgiveness is not included you have to option to cancel the sale. Since 2009, I’ve seen nearly 99.9% of my clients receive full debt forgiveness. I do have one complicated short sale in process where it appears the lien holder is going to require some contribution from the seller. But their situation is unique, and we still haven’t given up on our negotiations. I’ll let you know later how it turns out. Be sure to ask for referrals from the agent who is going to list your home, and from the negotiators he or she recommends.
  8. I can just “walk away” and be done; I hear this advise given my clients from well meaning friends and family over and over again. While it may feel like a huge emotional release to just give up and let it go to auction, the unresolved debt isn’t forgiven simply because you don’t own the house anymore. In many states, lien holders have the right to pursue this delinquency even after taking ownership through foreclosure. That means bankruptcy may be the only option, on top of the damage of foreclosure.
  9. I should list the property at a value that would pay off the mortgage; this isn’t so much a myth, as misinformation and poor training. Many sellers and realtors believe this is the best way to approach a short sale, even when it’s abundantly clear the market values are below a successful payoff at settlement. Listing too high at the beginning will hurt the resolution and value approval in the final phase of negotiations. When we meet, I’ll go over this in more detail. Strategies for successful short sale listing, including pricing and marketing, are extremely different than traditional real estate practices. Without training, a listing agent may take the wrong approach for you, by applying real estate standards and practice that work against short sale approval. In short, you want to list the property low to create a bidding war, and support a valuation that will work for all parties. Additionally, the photos need to clearly show all the faults in the home as the asset managers will make valuation decisions from how the property is marketed. Often appraisals are drive by. This is a situation where virtual staging, etc. can work against the best interest of the seller.
  10. I won’t be able to buy a home again; with a successful short sale your credit will recover more quickly than you think! Some of our clients found the lien holder never reported the debt forgiveness as expected and their credit was back in the 700’s very quickly. Worst case, most people have seen their credit recover completely and are able to qualify for a new home within 1 1/2 to 2 years, depending on the financing. On the other hand, a foreclosure will stay on your credit report for at least 7 years and may make mortgage approvals almost impossible for you. Part of the long-tail damage from a foreclosure is the trailing credit damage that can prevent you from moving on great opportunities that present themselves, causing additional lost opportunities for generational wealth building.

Short sales involve many aspects for success that require experienced, knowledgable professionals to help you succeed. I network with specialists across the country and work closely with a nationally based independent negotiator who is an amazing resource.

Check out my Stop Foreclosure page to learn more about your options, then let’s talk – book a time on my calendar here. Your information will be held in strictest confidence.

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Susanna Kunkel

Susanna Kunkel brings her skills from a career in the executive offices of major corporations to her real estate business - treating each client like a VIP. With 18 years of experience as a real estate advisor, you can be confident in knowledgeable, personalized, confidential service. Hear what her clients say - www.AskMeAboutSusanna.com

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