Short selling myths

Some will tell you that lenders are dragons and it is just not correct. They are ogres. But that’s not a reason not to short sell.

These types of sales have earned a horrible reputation from real estate agents, sellers, and buyers, for many reasons. For every bad story that details a horrible experience, you will also find successes.

Here are the 4 common myths:

Myth No. # 1: they take forever to close

The fastest I’ve been able to close any of my ads has been in 45 days. But I’ve also had buyers who were able to take the place of another buyer, after the first buyer left before approval, and closed within 30 days.

An average short sale requires:

• 7-10 days for the lender to acknowledge receipt of the complete package, consisting of the seller’s financial documentation and the buyer’s offer to purchase.
• A negotiator is assigned. Another thirty to forty-five days to get a value.
• Another two or three weeks for review and approval.

Myth No. # 2: short selling is overvalued

In some densely populated areas, publicly traded agents can price a home below market value. It is a method used by agents to attract more than one offer.

After all, the list price of a short sale is not very accurate, because no one knows what a bank will accept. But many lenders will review a price at a minimum of 85% of market value. Some offers to buy are so unreasonably low and are immediately rejected without review.

Myth No. # 3: Lenders Will Not Accept A Large Reduction

Homeowners are often surprised to find that in places where prices have fallen over a five-year period, a home can be valued at 50% or less than the seller paid for it. However, lenders find that the value of certain areas is rapidly declining. Either way, the lender will do their own research and know that they cannot sell a home for more than it is worth. The sale price of the home is not based on the amount of the loan; it is based on fair market value.

Myth No. # 4: Sellers Must Miss Mortgage Payments

Lender approval is based on the borrower’s hardship and the fair market price of the home. Some sellers may find it difficult to pay the monthly payment, but somehow they are managing and they have not been left behind.

While it is true, sellers who have not made payments get the file faster. The homeowner can still be approved without missing a mortgage payment. A great benefit of not missing a mortgage payment is that the homeowner can be approved to buy another home immediately (per Fannie Mae guidelines).