Don’t believe them!
Top 10 Short Sale Myths
Don’t believe them!
You do not necessarily need to be behind on your mortgage payments to qualify for a short sale; you just have to show that it’s going to get harder to make your payments. These are known as hardship reasons, and can include recent pay cuts, a divorce, a serious illness, job loss and more.
In fact, banks lose far less money on a short sale than on a foreclosure. Foreclosures can be costly at $50k-$70k per transaction in legal and other admin fees for a lender, so banks would always much rather go with the path of a short sale.
Each lender differs with certain requirements homeowners must meet to be eligible for a short sale. Make sure you are familiar with the lender’s specific processes closely. Your agent can help you with this.
Most short sales close within 2-4 months. However, there is no specific time frame promised in which homeowners can expect to have their property approved and closed as a short sale. Each short sale transaction differs and can take more or less time depending on the circumstances.
False! A foreclosure will affect your credit for up to 10 years, and a Short sale, only about 2 years! Also, in a short sale, you can expect to drop about 50-150 points on your score, but with a foreclosure, you can lose 300+ points. On your credit history, a short sale shows as a Settlement since there is no history term for Short Sale. However, on a Foreclosure, it shows as a FORECLOSURE, and can surely affect your future lending potential as well as the interest rate you can get from lenders.
Under conventional lending guidelines, many people can obtain a Fannie Mae backed mortgage two years following the close of their short sale, and other lenders can also lend in 2-3 years time.
Anti-deficiency protections are in place for short sales and foreclosures in many states, so you must check with your local law, but in most cases, a short sale is a Settlement, and the lender can’t pursue you further for the deficiency judgment.
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 are getting approved more than ever, since banks prefer this outcome compared to a foreclosure. Trained agents are far more likely to get your short sale approved.
The 2007 Mortgage Forgiveness Debt Relief Act, among other considerations protect homeowners from declaring the loss as income and in most circumstances will not owe any taxes on their transaction. This act expires at the end of 2012 but is expected to be extended. Talk to your tax advisor for more information.