There was a fine article about short sales in the Scottsdale and Phoenix Arizona market today. Since we, The Urban Team, are considered short sale specialists we really liked some truths about short sales revealed. The bottom line, short sales in Scottsdale, Phoenix, Glendale, Peoria and other Arizona cities are much easier to do than in times past.
Below are the 10 Short Sale Myths talked about in the article. I would have linked directly to the article in the November 29, 2009 article in the Arizona Republic but I could not find it online, only in print.
MYTH 1: You must be behind on your mortgage to qualify for a short sale.
There are many factors that determine qualification. Most experts say the letter of hardship and actual facts surrounding a homeowners hardship are most important. The AZ Republic article says you should talk with a real estate agent early in the game. We DO NOT agree with this. We believe you should talk with an attorney who specializes in distressed homeowner law including foreclosures and short sales. We have a link to several firms who specialize in this form of law on our Scottsdale and Greater Phoenix short sale site www.Short-Sale_Phoenix.com. Just look for the legal help tab. Once you have talked with a legal expert and determined a short sale is right for you, then talk to a real estate agent who is expert in short sales.
MYTH 2: Short sales rarely get approved.
This was very true in 2008 and most of 2009. Many factors made it hard. However, with proper preparation, good legal counsel and a savvy short sale Realtor, the percentages have gone way up. Many agents are reporting success rates above 80%.
MYTH 3: Banks would rather foreclose than approve a short sale.
It's not that the bank would rather foreclose than approve a short sale, it' is simply that foreclosures are easier. Laws are in place that make a foreclosure relatively simple whereas short sales take a lot more time and infrastructure. However, the investors who back the loans are finding it more profitable to do a short sale. New data suggests the investor can end up with as much as 35% more by a short sale than a foreclosure. In addition, the problems with vacant properties is alleviated in most cases.
MYTH 4: There's on time to negotiate a short sale.
Many lenders are postponing trustee sales these days allowing more time to negotiate a short sale. Again, this has to do with them being motivated by increased profits and reduced liability. We've seen banks respond very quickly when asked to postpone a foreclosure and consider a short sale.
MYTH 5: It's fine to submit simultaneous offers on short sale properties.
True, it is legal to do this but most banks prefer to look at one good offer. Multiple offers tend to clog the system and make the process more difficult. In addition, if the buyer knows they have the only offer on the table they are more apt to wait out the process.
MYTH 6: A short sale is a fire sale.
Definitely not true. The banks are looking at net proceeds of the short sale verses what they would likely make from a foreclosure. In general, we see successful short sales selling at or near market value. This is good for both the bank and the neighborhood where the home is located; A win/win. Low, fire sale offer are generally declined.
MYTH 7: Anyone can help negotiate a short sale.
The article in the Arizona Republic says to work with an agent with short sale experience to negotiate with your bank. We STRONGLY disagree with this approach. There are many legal ramifications that are best handled by an attorney. Our role as short sale real estate agents is to market and sell the home while working with the homeowner and his/her legal counsel. The actual negotiation of your existing contract, mortgage, is a matter of law, and best handled by someone with legal expertise. Please note: Most attorneys do not have short sale skills and knowledge so finding one who does is very important to your success.
MYTH 8: A short sale is not worth the hassle.
In many cases, a short sale can have less damaging effect on your credit. In addition, we've found that many homeowners feel a sense of comfort knowing they didn't just walk away from their problems, they participated in creating a successful outcome. Many have said they were glad to meet and know the person who would end up with the home rather than see it go to the bank and possibly get vandalized.
MYTH 9: Short sales are as financially damaging as foreclosures.
This is a case by case situation best determined by a tax attorney or CPA. The good news is that many banks do not report a short sale in the same manner as a foreclosure and there is less damage to your credit history and less effect on employment background checks. The AZ Republic article says that Fannie Mae back loans allow eligibility for a new loan in as little as 2 years if you have a short sale verses 5 years for a foreclosure.
MYTH 10: Short sale negotiations are adversarial.
We have not found this to be true. The greatest problem is the person representing the lender/investor is often buried in a sea of paperwork. If your short sale package and purchase offer are professionally handled it helps a lot. Also, being cordial rather than defensive is important. If you tick off the bank's representative they are likely to set your file aside and move on to a less confrontational customer. We've found that most are decent people trying to do a very hard job.
Well... that sums up our take on the 10 myths about short sales. If you want more information, a set by step guide, referrals to legal counsel and more, our short sale web site has pages of information and answers. Just go to www.Short-Sale-Phoenix.com.