Some will tell you that lenders are dragons and that is simply not correct. they’re ogres. But that’s not a reason not to do a short sale.
These types of sales have earned a horrible reputation from real estate agents, sellers, and buyers, for many reasons. For every bad story detailing a horrible experience, you’ll also find successes.
These are the 4 common myths:
Myth #1: They take forever to close
The fastest I’ve been able to close any of my listings has been 45 days. But I’ve also had buyers who were able to take the place of another buyer, after the first buyer backed out before approval, and they closed within 30 days.
An average short sale takes:
- 7-10 days for lender to acknowledge receipt of complete package, consisting of seller’s financial documentation and buyer’s offer to purchase.
- A negotiator is assigned. Another thirty to forty-five days for a value to be obtained.
- Another two to three weeks for review and approval.
Myth #2: Short sales are overrated
In some densely populated areas, real estate agents may purposely list the house below market value. It is a method agents use to attract more than one offer.
After all, the list price at a short sale isn’t exactly accurate, because no one knows what a bank will accept. But many lenders will revise a price to a minimum of 85% of market value. Some purchase offers are unreasonably low and are immediately rejected without review.
Myth #3: Lenders won’t take a big downgrade
Homeowners are often surprised to discover that in places where prices have fallen over a five-year period, a home may be valued at 50% or less of what the seller paid for it. However, lenders realize that the value of certain areas is rapidly declining. Either way, the lender will do their own research and know that they can’t sell a house for more than it’s worth. The sale price of the home is not based on the amount of the loan; It is based on fair market value.
Myth #4: Sellers Must Miss Mortgage Payments
Lenders’ approval is based on the borrower’s hardship and the fair market price of the home. Some vendors may be struggling to pay the monthly payment, but they are managing somehow and they are not far behind.
While it is true, sellers who have fallen behind on payments get the file reviewed faster. The owner can still be approved without missing a mortgage payment. A big advantage of not defaulting on the mortgage is that the homeowner can be approved to purchase another home right away (per Fannie Mae guidelines).
