With all the talk about foreclosure and short sale out there we thought we'd take some time today to make sure you aren't believing some of the most common myths out there.
1. The Bank Would Rather Foreclose than Bother with a Short Sale
This is one of the most common misconceptions. The reality is that banks do not want to foreclose on your property because the foreclosure process is incredibly costly. Banks, investors, and even the federal government have all publicly stated that if a person is qualified for a short sale, the deal needs to be considered.
Overwhelmingly, banks receive more on their investment through a short sale than a foreclosure. The qualifications for a short sale include:
Financial Hardship - There is a situation causing you to have trouble affording
Monthly Income Shortfall - "You have more month than money." A lender will
want to see that you cannot afford, or soon will not be able to afford your
Insolvency - The lender will want to see that you do not have significant liquid
assets that would allow you to pay down your mortgage.
2. You Must Be Behind on Your Mortgage to Negotiate a Short Sale
While this may have previously been the case, today lenders are looking for verifiable hardship, monthly cash flow shortfall, or pending shortfall and insolvency.
If you meet these three requirements and believe that you soon may be unable to afford your mortgage, act immediately. Any delay could limit your options. Do not wait until the countdown clock to foreclosure has started and you have even less time left.
3. There is Not Enough Time to Negotiate Your Short Sale Before Foreclosure
This is a myth that probably hurts homeowners the most. Many do not realize that
foreclosure is a process, and that there is time to make decisions that may result in better outcomes.
The foreclosing party-in most cases a lender-can stall a foreclosure up to the final
day of the process. Today, many lenders will stall a foreclosure with as little as a phone call from you explaining that you are trying to sell, and almost all lenders will stall a foreclosure with a legitimate contract. For real estate professionals who understand foreclosures and short sales, there is time available until the foreclosure process is complete.