Myths and Truths about Short Sales

Myths and Truths about Short Sales

Myths and Truths about Short Sales

Myth:  A person has to be behind on their payments to sell their house as a short sale.
Truth:  Many mortgage lenders are considering short sales even when the borrower is current on their payments.

Myth:  If a person sells their house as a short sale, they will owe money to their lender.
Truth:  In many short sales, the lender forgives the remaining debt.

Myth:  Short sales are only allowed for owner-occupied homes.
Truth:  Short sales are permitted on commercial buildings, investment properties, land, and any other type of real estate.

Myth:  An owner can sell their property as a short sale without listing with an agent.
Truth:  Mortgage lenders want to know that a real estate agent listed the property and marketed it to the general public, so a reasonable and ethical offer is generated.

Myth:  You need a buyer before the lender will negotiate a short sale.
Truth:  More and more lenders and short sale programs are considering pre-approvals before a bona fide buyer offer is presented.

Myth:  In a short sale, the lender owns the house.
Truth:  The homeowner is the owner of record until the property is transferred, so in a short sale the lender does not take ownership unless a foreclosure occurs.

Myth:  The lender is responsible for property maintenance.
Truth:  The owner of record is responsible and liable for the property, so they must shovel the snow, cut the grass, keep the pipes from freezing, and maintain insurance coverage.

Myth:  There are laws that require lenders to respond to short sale offers from buyers in a certain period of time.
Truth:  There are no laws that require lenders to respond to offers, but there are some short sale programs where participating lenders agree to respond under certain conditions.

Myth:  All short sales follow the same timeline.
Truth:  Each short sale varies, depending upon the lender, the short sale program, whether there is a buyer, and how responsive the seller is to lender requests for paperwork.

Myth:  The lender always forgives the remaining debt.
Truth:  While many lenders forgive the remaining debt, some lenders may expect a contribution from the seller or perhaps a promissory note to be paid later.

Myth:  The lender can be convinced not to send an IRS Form 1099-C to the borrower.
Truth:  In all short sales involving forgiven debt, the lender sends a 1099  to the former borrower as a means of writing off their loss.

Myth:  One person at the lender can make the decision to approve a short sale.
Truth:  In most short sales, there are a series of decision-makers, including people at the servicer, the investor, the mortgage insurer, and a government entity.

Myth:  Calling the lender every day makes a short sale happen faster.
Truth:  Successful short sales often involve periods of intense activity followed by periods of inactivity, where one must wait for another party to run through their process.

Myth:  The lender will delay a foreclosure action if an offer was sent to them.
Truth:  Some lenders will delay a foreclosure action in some cases, but they often will continue with the foreclosure even while considering a short sale.

 

Contact Information

Photo of Cindy Gardner Real Estate
Cindy Gardner
Century 21 New Millennium
2448 Holly Avenue
Annapolis MD 21401
410-703-9202
Fax: 443-458-0174

Now merged with Century 21 New Millennium with Listing Agents in Virginia and Washington, DC to handle your Short Sales.  Also facilitating Short Sales in Anne Arundel County, Prince Georges County, Howard County, Montgomery County, Baltimore County, Baltimore City, Calvert County, Charles County, Carrol County, Frederick County, Talbot County and Queen Anne’s County, Maryland

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Cindy Gardner
Century 21 New Millennium
2448 Holly Avenue
Annapolis, MD 21401
 Phone: 410.703.9202
  Fax: 443.458.0174
Cindy.Gardner@C21NM.com