Short sales are the subject of lots of misconceptions and myths, leaving many buyers and sellers confused or misinformed about this type of real estate sale.
A short sale involves a lender-approved sale of a home for a price that’s less than the total amount owed on the mortgage. The sale price comes up “short,” hence the name.
Here’s a look at some common misconceptions and myths about short sales!
Myth: I’ll have to pay the difference between the home sale price and the amount owed on the mortgage.
This is not necessarily the case. Many lenders do not pursue the borrower for the difference in cases where the short sale was performed in good faith.
In some cases, the lender may ask financially-able borrowers to make a lump sum one-time payment, while others may be asked to sign a promissory note to cover a portion of the balance. But this is not always the case.
In reality, many lenders can write off the difference. You must also remember that a significant portion of the amount owed on the home loan is interest and fees or penalties. Once these figures are taken into consideration, the lender may find that they’ve still profited from your loan, even though they didn’t get the full amount due. For this reason, the lender is often willing to walk away once the short sale is complete.
Myth: I don’t qualify for a short sale because I haven’t missed a mortgage payment.
This used to be true, but today, this is no longer the case. New laws, regulations and policies are now in place that allow you to pursue a short sale if you’re in imminent danger of missing payments due to a change in your financial situation.
This is a change that’s very favorable for the borrower because it means you don’t need to destroy your credit in order to pursue a short sale, meaning the adverse impact on your credit score can be minimal.
Myth: I won’t be able to get a new mortgage in the future if I opt for a short sale.
This is not the case, especially in instances where you had to pursue a short sale as a result of circumstances that were beyond your control such as a job loss, a death in the family or a medical crisis. Each lender’s requirements and policies vary, but it’s not uncommon for lenders to offer new mortgages to individuals who’ve established new credit for a timeframe of 24 months (2 years) or longer.
Even individuals who had to seek out a short sale due to poor financial management skills or similar can seek out a new mortgage in the future, although you must re-establish your credit for a minimum of 48 months (4 years) in most cases.
Myth: It takes a long time to complete a short sale.
Not necessarily. Short sales previously took much longer, but again, new laws and regulations have expedited the process significantly.
The amount of time it takes to complete a short sale is now significantly less than it was in the past, which is favorable for buyers in particular. The amount of time it takes for the lender to approve a potential buyer’s offer on the property does vary according to factors such as how many short sales the lender is currently processing.
In addition, working with an experienced real estate professional like Kristine Zelazo — who specializes in short sales — can really expedite the process of buying or selling a short sale property.
If you’re ready to sell your home or if you’re an investor who needs help finding the perfect short sale property in South Florida, turn to the Short Sale Gal, Kristine Zelazo! Call 800.664.0616.