Misconceptions about a Short Sale
There are a number of misconceptions about a short sale in the real estate industry. There is no doubt the short sale is not an easy task to do, it requires a lot of experience and skills to be accomplished. Some people will tell you that short sale negotiators are dragons, and that’s simply not true. They are though, difficult to deal with them, but it does not mean they are cannot be negotiated. Short got bad word of mouth from agents, sellers and buyers due to the misconceptions attached to it. Every short sale proposal is not a nightmare, it also has great success stories. You need to be proactive and have all the required skills and expertise to make it successful.
Misconceptions about a Short Sale
Short sale is best alternate to foreclosure and bankruptcy. It offers you a peaceful solution, but requires a lot of things need to be done on right time. Short sale has some major misconceptions, but it should not be avoided due to the misconceptions attached to it. Some of the top misconceptions about short sale are discussed here:
Time Required to Close a Short Sale
Short sale is not an overnight process, it takes a good time to close. The short sale may take few weeks to month duration to be closed. The time requirement mainly depends upon the lender you are dealing with. Some lender are easy to negotiate and some very difficult.
Average time required for a short sale when the loan is held by cooperative bank is give here:
- Seven to ten days may be required to acknowledge the receipt of the complete short sale package that consist of personal seller documents and real estate related items, including the offer made from buyer side.
- After the assignment of a negotiator, about thirty to forty five days may require for a BPO appraisal.
- Another two to three weeks may require for management, investor interview and the short sale proposal.
The time required for a short sale also may depend on the ownership of property. The servicing bank may not actually own the loan and there the bank must has to follow the guidelines of investor. You cannot simply raise a finger on any bank and call it a bad negotiator because it would be ridiculous. Banks are a separate legal entity and have to run the short sale process according to their own rules and regulations.
Short Sale Buyers Pay Too Much
In different metropolitan areas short sale listing agent may deliberately price a sale below the market value. This is a great trick that short sale agents use to attract more offers. After all, a listed price on a short sale is fabricated because you won’t have any idea how much the bank will accept until the offer is submitted. The majority of banks will consider a short sale price at a minimum of 90% of market value. If the price is enough price is not quoted bank will reject the offer.
Banks Won’t Accept a Severely Discounted Payoff
Sometime sellers are surprised to know that a house might be worth only 50% or less of its original amount when the seller bought it because the market where prices have down over a period five years.On the other side banks run their own research to value of home and has come to the same conclusion. The price of the home is not based on the mortgage price, but on the recent comparable sales. It means that the bank will accept the market value not the mortgage value because if the home went through the foreclosure, then back on the market, it would be not be sold more than the current market price.
Sellers Must Be in Default Before the Bank Will Approve a Short Sale
Banks need a hardship letter to from the lender to approve the short sale of the home. Sometime sellers only may struggle to make their monthly mortgage payments, but have not fallen behind their payments. It is true that a seller in default immediately receive attention, a seller may continue to make monthly mortgage payments and also qualify for a short sale.
Agents Get Paid a Lower Commission
In the starting days of short sale boom, during 2005 to 2008, banks were treating the short sale commissions ridiculously and were trying to reduce the short sale agent’s commission as low as possible.
These days, most banks pay a traditional commission and top of which, Fannie Mae established a compensation policy on February 24th, 2009, to pay the amount of commission agreed between the listing agent and the seller, keeping in view that fee does not exceed 6%. This fee structure holds for HAFA short sales as well.