Working with Wilmington sellers, who are underwater on their homes, we often find there are some misconceptions about short sales. They have the potential to prevent home owners from taking the needed steps for protecting their best interests; so, we wanted to take a moment to clear up some of those myths…
Myth #1. Short Sales Have the Same Closing Timeline as a Normal Sale. Contracts on non-distressed homes, where there are no liens and the buyer is preapproved, take about a month to close. Short Sales used to take anywhere from 6 months to two years, but crackdowns on banks have forced them to shorten the process considerably. Still, most buyers will have to wait 2-6 months depending on the bank and type of loan.
Myth #2. Short Sales Don’t Close. They do. It just takes longer (see Myth #1). According to the National Association of Realtors, 10% of homes sold nation wide in August 2012 were short sales. In New Hanover, Pender, and Brunswick County, 7% of homes sold were short sales. These numbers are down considerably from 2011.
Myth #3. You Must Have Missed Payments to Qualify for a short sale. Banks will consider anyone who is able to provide proof that they are facing a financial hardship. Hardships they will consider include: unemployment, reduction in income, divorce, death of a borrower, medical bills, disability, natural disaster, employment relocation, and an increase in living expenses outside of the owner’s control.
Myth #4. Banks Would Rather Just Foreclose on a Home. In the great scheme of things, foreclosing on a home is much more costly for banks than completing a short sale. Not only does it cost money for them to take the legal actions to reclaim the home, but they also risk losing even more money on the house once they relist it. An approved short sale guarantees a bank will recoup at least part of the home’s value.
Myth #5. Homeowners Must Be Pre-approved by the Lender. A homeowner can go ahead and list their home as a short sale without speaking to the bank first. When agreeing to a price, banks consider basically the same factors that set a home’s listing price – how other homes in the neighborhood are selling and the condition of the property. When you receive an offer, you submit it with all backup documentation (comparables, showing feedback, property history, etc.) to the bank. That’s when they approve the short sale. However, some lenders do have a program where you can get a preapproved price they are willing to accept, which can expedite the entire process.
Finally, home owners shouldn’t try to do a short sale alone or hire just any Realtor® to sell their underwater home. Dealing with the bank can be extremely difficult. There is a LOT of document shuffling and weekly calls to be made. A certified short sale specialist, a Realtor® trained and experienced in the short sale process, can relieve a lot of the stress. They know what banks require and keep up with the changing rules of short sales.
Melanie Cameron of The Cameron Team is a Certified Short Sale Specialist. If you’re considering selling your home and suspect you’ll need to sell it for less than owed, give Melanie a call at 910.202.2546. She can answer any questions you might have about short sales and explain the steps she takes to assure your situation gets all the attention it needs.