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SOME COMMON MISCONCEPTIONS ABOUT SHORT SALES
Many homeowners and agents alike don't fully understand short sales. Here are some common misconceptions about short sales to help you wrap your mind around it.
Misconception: Lenders will not accept a short sale unless the homeowner is behind on their payments.
This simply isn't true. As long as you can show the lender that you absolutely will eventually start to go behind, they will consider cutting their losses sooner than later. The reason's may vary, just as long as you show them that is the case, you can make the nightmare be over sooner than later.
Misconception: Lenders will not accept an offer that is below fair market value....
Fair market value is what a buyer is willing to pay and a seller is willing to accept. Regardless of the final price, that is considered the fair market value. The amount owing on the loan has no bearing on fair market value. As long as it is in the lenders best interest to move forward with an offer, they will. It is definitely in the best interest of the lender to sell the home now to the buyer that is ready, willing, and able then it is to try to wait for a higher offer.
Misconception: Lender's won't except pennies on the dollar...
It depends on the situation, but it is definitely plausible to get a lender to accept 50 cents, or even 40 cents on the dollar. Again, it falls to the lenders best interest.
Misconception: A second mortgage will sign off on the short sale even if you don't give them anything....
Not true. It takes employee time and money to sign off on paperwork. Would you do work for free? No. You must structure the short sale so that the second lien holder has incentive to participate.
Misconception: The bank will not accept an offer once they have turned it down...
Bank's are often very large. One hand doesn't know what the other hand is doing in many cases. Because they are so large they have many employees. Every employee has a manager. Manager's can always override a decisions by their subordinates. If you can get through to someone who can override the original answer, you can get the sale approved. Remember, it's all about what is in the best interest of the bank.
Misconception: Banks won't pay for your agent....
Bank's know there are selling costs. If they foreclose, they will have to pay an agent to sell the home. They would rather pay an agent now and sell it to a buyer that is ready. It's all about cutting their losses.
Misconception: Lender's would rather foreclosure than do a short sale....
Absolutely not! Lender's generally have a much more significant loss by having to pay for foreclosure, maintain the property, and pay for another agent to sell it. The reason many short sales fail is because the agent is inexperienced and doesn't know what they are up against. A good brokerage like Utah Full Service Brokers can help assure that your sale is almost always approved.
A HELOC is just like any other second mortgage....
A Home Equity Line of Credit (HELoC) is nothing like a traditional mortgage. A HELOC functions more like a revolving credit card. It's tied to the property. But it is also separately tied to the borrower. A HELOC can obtain a deficiency judgement and can collect payments for up to 20-years after the property has been foreclosed or sold. A HELOC lender will simply look at how much they can hope to collect over 20 years. If the offer has room for them to collect that much now, then they will most likely accept. If it doesn't, then they will take their chances over the next 20 years.
Misconception: The property must be listed at full market value to get a short sale approved....
Lender's aren't monitoring the market. Market value is a relative term. They don't know what market value is. Listing at market value and then having to reduce well below value at the end is more detrimental than listing slightly under market value (as defined by your agent) and getting an offer to the bank sooner.
Misconception: Lender's won't let you submit your "hardship package" until you have an offer....
Most lenders want you to believe this. They won't want to have to spend time, energy, and money until they know they may get paid. However, as mentioned earlier, if you get past the initial droid that tells you that and move to their manager, you can often get them to review your hardship package even without an offer. Why is this important? Because it takes several weeks to review a hardship package, plus another few weeks to review an offer. If you can get half of the battle taken care of before the offer comes in, you will shorten the length of time required to complete the sale.
CONCLUSION
The conclusion is this. If you are in default of your loan or you know you may be in the very near future based on your current situation, a short sale is the cleanest, fastest, and most comfortable way to end your problems. Call me and find out why I am so good at helping homeowners negotiate with their banks to get the homes sold and the bank off the homeowners back.
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