Top 10 Short Sale Myths

You must be behind in your payments to qualify for short sale. You do not necessarily need to be behind in your payments. You just need to show “hardship reasons”, including: Pay cuts Divorce Serious illness Job loss

Banks would rather foreclose on a property than bother with a short sale. Banks lose far less money on a short sale than a foreclosure. Foreclosures can cost $50,00-$70,000 in legal and administrative fees, so banks would much rather go for a short sale.

To be eligible for a short sale, the lender has to pre-approve the transaction. Eligibility requirements differ from lender to lender. Make sure you are well versed in the processes and requirements of your lender. Your real estate agent can assist you.

Short sales can take over a year to close. Most short sales close within 4-5 months. There is no specific time frame since each short sale is unique and can take a longer or shorter time based on the circumstances.

A homeowner’s credit is better off if they foreclose as opposed to a short sale. A foreclosure shows as a FORECLOSURE and will affect your credit for up to 10 years, and your credit can drop by 300 points. A short sale will show as a SETTLEMENT on your credit report and will affect your credit for a maximum of two years, and your credit score will lessen by only points.

If you short sale your house, you can’t purchase another property for five years or more. Under conventional lending guidelines, you can be eligible for a Fannie Mae mortgage within one year, and other lenders will lend after 2 years.

You could be sued after the close of a short sale for the deficiency. Anti-deficiency laws differ from state to state, so check your local laws. In most cases, a short sale is a SETTLEMENT and a lender can’t pursue you any further for a deficiency judgment.

Short sale agents must have special training and meet certain requirements to short sale homes. Since short sales are very complex transactions, it is essential for agents to understand and know the ins and outs of the short sale process and how to best negotiate with your lender. However, short sale agents do not need any specific type of training or certification to short sale homes.

Short sales almost never get approved. Since banks prefer short sales to foreclosures, short sales are getting approved more than ever. Trained agents are far more likely to get your short sale approved.

After a short sale, the homeowner is forced to declare the loss as income and will receive a The 2007 Mortgage Debt Forgiveness Relief Act, among other considerations, protects the homeowners from declaring the loss as income and in most circumstances will not owe any taxes on their transaction.

Don’t Let the Threat of Foreclosure Weigh You Down!

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