If you’ve been reading up on short sales in downtown, north central and greater Phoenix you are likely quite confused. One of the big problems is that Arizona has some very special statutes that make short sales and foreclosures different than in many other States. Plus, the rules of the short sale game change as often as a politician’s mind, thus causing even more confusion. Below we have addressed a few of the myths that plague the Phoenix short sale process. We hope that this information helps you better understand the short sale process.
SHORT SALE MYTH #1: I have to be behind on your mortgage to qualify for a short sale. Not necessarily. Lenders look for three things: a “verifiable hardship,” such as a job loss, pay cut, job transfer, divorce or serious illness; a monthly cash-flow shortfall or pending shortfall and insolvency; or lack of liquid assets that would allow you to pay down your mortgage. Distressed homeowners often wait too long, and should consult with a qualified short sale attorney and real estate agent before burning through savings or trying such desperate measures as using a credit card to cover mortgage payments.
SHORT SALE MYTH #2: Short sales rarely get approved. In the early days this was absolutely true. Luckily the various players have gotten their act together and the success rate is much higher. Many lender/investors see the value, in real dollars, of a short sale verses a foreclosure. Plus more consistent policies are now in place, the various parties are better trained. This and many more factors mean more short sale approvals.
SHORT SALE MYTH #3: Banks would rather foreclose than approve a short sale. Banks typically lose 25-35 percent more on a foreclosure than a short sale. They also avoid the hassle and liability of vacant properties
if they can approve a sale before foreclosure. That said, the decision is often based on the bottom line dollars. If the lender/investor makes more by going the foreclosure route they may not approve your short sale. We find one of the biggest factors is if mortgage insurance is in place or not. If it is, the lender/investor may get a payoff if the home goes into foreclosure that would not happen with a short sale.
SHORT SALE MYTH #4: There’s not enough time to negotiate a short sale. It’s always worth a try. Don’t wait too long to reach out for help increasing number of lenders want to see an offer submitted with all required documentation at least 30 days before trustee sale.
SHORT SALE MYTH #5: It’s fine for buyers to make simultaneous offers on short-sale properties. While it may be legal, buyers making undisclosed multiple offers is deemed unethical at best. Often homeowners only have time for one offer to be considered by their lender. We feel buyers need to be committed to the offer they have made.
SHORT SALE MYTH #6: A short sale is a fire sale. NOT SO! Lenders expect offers that closely reflect true market values. For buyers, you will likely purchase the home a bit under market price and often get a property that is in better shape than a bank owned home.
SHORT SALE MYTH #7: Anyone can help negotiate and help execute a short sale. Homeowners need to research and look for attorney’s, negotiators, tax professionals and Realtors with special training and skills, strong moral compass and a high success ratio. Short sales are anything but normal and do require much specialized knowledge and training. FYI: The Urban Team has taken dozens of hours of short sale specific training and is a member of the Fidelity National Title short sale mastermind group. Your success and safety is VERY important to us.
SHORT SALE MYTH #8: A short sale is too difficult. For buyers, short sale properties are often in better shape than foreclosures, priced below current market value and, thus worth the wait. Knowing the seller is living in and maintaining the home has huge value as well as receiving the seller’s property disclosures not offered on bank owned homes. For sellers, short sales may be a worthwhile option. This is best determined after meeting with a short sale knowledgeable attorney, tax professional and Realtor. I know we keep repeating this, yet your financial and legal safety is too important for us not to stress good counsel.
SHORT SALE MYTH #9: Short sales are as financially and credit damaging as foreclosures. Unlike foreclosures, short sales are far less damaging on a person’s credit history and don’t present problems with employment or security clearances. Homeowners who undergo a foreclosure are ineligible for a Fannie Mae-backed mortgage for five years, while a homeowner who closes a short sale is eligible for a Fannie Mae-backed mortgage after two to three years.
SHORT SALE MYTH #10: Lenders don’t want to help homeowners with short sales and prefer a battle. Sometimes this is true. It really depends on the person assigned by your lender/investor. There are nice people and some not so. In general, successful short sales are more a matter of communication and organization – having all the paperwork in order and knowing exactly who needs what when in order to help banks approve a sale. Creating a team approach with lenders leads to a more successful outcome. This is just one of the reasons we have our homeowner/clients hire a professional negotiator (see our article on short sale attorneys and negotiators) to communicate with the lender’s representative. In our opinion, it takes hundreds of negotiations by someone with a legal mind to fully understand the process.
The Urban Team at Realty Executives
7600 N. 16th Street, Suite 100
Phoenix, AZ 85020
If you have questions or need help deciding if a short sale is right for you, please know we are here to help.[contact-form-7 404 "Not Found"]