Short Sale Myth Exposed - Temecula Short Sales
There’s been a rumor going around I want to expose the truth that if a homeowner hires a real estate agent and puts their home on the market as “short sale,” that will stop foreclosure.
Sorry to break the bad news. Putting a home on the market as “short sale” will not stop foreclosure. The only way a short sale can avoid foreclosure is if the home is actually sold as “short sale.” This means the homeowner’s lender has to approve short payoff, less than what is owed on the mortgage.
Short sales are paperwork intensive. A homeowner will have to gather more paperwork for a short sale than when they first got their mortgage loan. A lender reviews a homeowner’s, or borrower’s, financials and hardship letter and then will make a decision if they will accept short payoff or not.
Short sales also require a buyer, which means the home has to be available for showings.
Just putting your home on the market as “short sale” will not stop foreclosure.
Homeowners have heard things that they can “hire a REALTOR®” and put their home on the market, and then bail at the last moment. If a short sale seller has accepted a buyer’s contract, received short sale approval by their lender, and escrow is opened, and then bails, they are liable to pay broker/agent commissions. In other words, the listing broker can sue short sale seller for commissions.
I’d rather not spend my time in court. As a REALTOR® I took an oath with my local REALTOR® board.
To paraphrase, a REALTOR® is not to deceive the public. Putting a home on the market knowing the seller has no intention of going through with the short sale is deceiving the public.
Also, all dealings with other agents and REALTORS® are to be honest. If I tell a buyer’s agent that their client will be able to buy my short sale seller’s home subject to lender approval, when I know the homeowners have no intention of going through with the short sale, is dishonest.
REALTORS® are smarter than some like to believe. I’ve been doing this long enough to know when I’m being fooled. Some tell-tale signs a short sale seller is going to bail.
Lie about facts. Cancel appointments. Ignore and not answer calls. Not return voice messages. Not respond to emails. Not return paperwork and/or incomplete paperwork. Pretend they don’t understand. Not make their home available for showings.
An uncooperative short sale seller is cause for cancellation of listing. My time is too valuable to waste when I could be helping a homeowner who truly wants to short sale their home to avoid an inevitable foreclosure.
Pamela Seley, REALTOR®
CA DRE lic # 01824145 | Dir 951.491.4063 | pamelaseley.com | Getting Your Temecula California Home In Order to Sell | ColorYourUniverse
Serving Southwest Riverside County California| Hemet/San Jacinto Valley, Temecula Valley, Murrieta, Menifee, Winchester, Lake Elsinore, Canyon Lake, Corona, Moreno Valley, Wildomar | Serving South San Bernardino County | Loma Linda, Highland
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23 Comments on Short Sale Myth Exposed - Temecula Short Sales
WOW Pamela!! Congrats on the feature. A vast amount of data and all so true. Sad to say you needed to post it as the rumors keep flying about short sales.
Yes mam. It's our job to make sure our sellers understand this. And if our sellers want to know how to stop the foreclosure we need to immediately tell them to seek legal advice. As a short sale broker my job is selling the property and getting the short sale approved and closed. Stopping or postponing a foreclosure is the job of an attorney.
Pamela, I can't believe there may be some agents out there who advise their clients to do this.
Thank you for the informative post. There will always be people trying to manipulate the situation to there benefit.
Right now I am dealing with a bank who excels at crazy making...but the people who come in contact with me don't know that and assume some thing is a foot. I stand ready to explore and answer any questions and so should anyone else in this business. Being transparent is the way to go. You describe the fraud dynamics well and it is frequent out there still.
I had a short sale last year in which we had a qualified buyer, we were agreeing to the short sale lender’s demands for a variety of changes that benefited the short sale lender and, suddenly, the short sale lender announced that they had decided to foreclose. No warning, no explanation, just a decision to foreclose. So…no nothing is a guarantee against foreclosure.
Phil, there's only so much an agent can do. All that work and then to have it go to foreclosure in the end! Sad, but I know it happens. Thanks for your comment today,
Ed & Tracy, thank you!
Kathryn, sorry to hear that! It is heartbreaking. This is why short sales can be so difficult because it is always up to the lender to decide if they will agree to it or not. There are so many possibilities we never know, but can only guess.
James, it may seem like it is nothing to the short sale seller, but the success or failure falls on us in the end. An uncooperative seller is no help.
Bryant, yes I agree! Even in California where we have non-judicial foreclosures, depending on the timeline, the possibility of the lender sending the home to trustee sale is always a risk. There's no guarantee an investor won't send a home to foreclosure even if there's an offer on the table. Given there's so many homeowners who need assistance it may be better to focus on those that aren't as close to the end. Thanks for your comment today and the reminder we are not attorneys!
Michael, those are usually the listing agents who don't return phone calls, or if they do there's some excuse why the home can't be shown, yet it stays on the market for months. Our job is to get it sold and send in the lender's requirements for short sale review. If a homeowner wants to stall, they should get an attorney, not an agent. Thanks for your comment today,
Pamela, there are and misinformation out there too.
Richie, thank you. I agree, there are times when we can't say certain things, but I always try to keep the other agent updated to what is going on and if there's a snag to let them know. That way they can explain it to their clients and let them decide. It's not fair to drag them along with false hope. I'm skeptical of short sale sellers who are mysterious. I'm on their side, but if they cause me to play games or lie for them to other agents, the public and/or their lender, I have to remove myself. Thanks for your wisdom today!
John, thank you for sharing your experience. I like to be confident, but yours is a good reminder that no matter how well we do our job there is always that possibility the short sale will not be successful. It again falls to the lender whether they will approve or not. Thank you for your comment today,
It can postpone the foreclosure and as you wrote many sellers know this and then list the home in an effort to "pretend to extend". I have seen agents fooled by these sellers.
Ask questions at the listing appointment.
Why do you want to do a short sale? I want to hear a few answers, one being protecting their credit rating. Another answer would be to get a fresh start or they hate the feeling of being late on payments and the phone calls. If I think they are pretending to extend the free time in the home, I let a competitor take the listing.
Michael, great comment. I like your term "pretend to extend" I'm going to remember that. I agree, ask questions of the seller at the listing appointment. Can't be emphasized enough the answers to "why do you want to short sale?" should be (1) want to protect credit rating and (2) feel uncomfortable not making payments and need to do something. Thanks for your comment today!
P.S. I think you've got a blog post there.
Yes an uncooperative seller -- drop that listing right now.
Pamela - As usual a timely post and great information ... as we are starting to see a little more activity with the banks, this information if even more important to get out to distressed homeowners!
Erica, yep. Was told they would not recommend me to anyone! lol
Jack, thanks. Scams are out there too. Agents have to beware that homeowners may have been told to list as short sale while their fraud company is busy taking their hard-earned money promising them they'll get their house back free and clear. Thanks for your comment,
The laws in every state are different. In New York, they will postpone a foreclosure if a short sale is in the works . . . up to a point!
Donald, most lenders will postpone a trustee sale if in short sale review, but like you say up to a point. If buyers keep backing out that can be a problem. Thanks for your comment today,
Pamela - Uncooperative short sale sellers - ugghh! There are so many myths out there about short sales and foreclosures.
Thanks Pamela, this article is a good resource to hand out to all of our short sale sellers, this will weed out the bad ones quickly.
Christine, and with short sales to be around for the next several years, we have to be vigilant. Thank you for your comment,
Bob, thank you. Hope my post is helpful. I would give it to prospective sellers, but since I wrote it the sellers who don't respect agents won't believe it! lol Thanks for your comment today,
It may delay foreclosure but it certainly won't stop foreclosure.
Agree, the delay would be if an offer is submitted for review. Some lenders though willl keep moving toward foreclosure, offer or not. Thank you for your comment,