Pleasanton, California (EastBayDaily) — It is frustrating to see how many myths are shoved to the public about short sales. There are many benefits of short selling your home. Many people don't see the benefit. They don't do anything to avoid foreclosure and let their bank foreclose. Some of the benefits include:
1. In California, a short sale often allows the seller to walk away without owing anything. We are often able to negotiate away all the debt. Banks know they will net more money with a short sale versus a foreclosure. In fact, a recent study showed banks would net 20% more money with a short sale versus a foreclosure. Because of this, most short sale banks completely forgive the debt. Yes, they might be losing $100,000, or more. However, they would rather cut their losses and let you go free.
2. Short Sale Sellers are eligible to buy another home much faster. For example, Fannie Mae recently released a guideline for sellers who short sale. If you short sale, then you are eligible to buy another home two years after the short sale. Of course you will still need to qualify for the new purchase.
3. A Short Sale preserves your dignity. You won't have a "Notice of Foreclosure Sale" posted on your door while you still live in the neighborhood. The foreclosure information could also be visible on websites like Zillow and Trulia as it is public record.
4. A Short Sale does less damage to your credit. Your credit score typically drops by 250 to 300 points on a foreclosure. With a short sale, your credit may only drop by 50 points, provided you are current on all your obligations.
5. When you apply for a loan in the future, most loan applications ask if you have ever had a foreclosure. If you do a short sale you will not have to answer Yes to that question.
Below are some common myths that people believe about short sales, and the truth about the misconceptions.
â¢Short Sales Are Very Difficult And Not Worth The Aggravation- Saying that a short sale is difficult is like someone who has never driven a car before telling you that driving is "very difficult." So what is the truth? Are short sales impossibly difficult? Are you wasting your time even thinking about short selling your home? Obviously it depends on the agent's experience and skill level. Short sales are not difficult for experienced agents like those on our team. If a problem occurs, then we know what will solve it. For us, short sales are easy.
â¢Someone Can't Short Sell a Home Because they Don't Have Any Money To Pay The Realtor- Anyone can short sell their home and it costs them zero dollars out of pocket. How is that possible? The bank will pay the realtor. The mortgage company would rather sell a house as a short sale instead of after foreclosure or bankruptcy. They agree to pay all the selling costs and the realtor's commission. The seller benefits from salvaging their credit and walking away from the debt.
â¢The Home Has To Be On the Market For 90 Days Before the Bank Will Consider A Short Sale- A lender must give an answer on any short sale file within 45 days. As you can see, the 90 day rule does not apply to Short Sales. We have negotiated hundreds of Short Sales and have never seen a lender request the home be marketed for 90 days before they will consider an offer. That is ludicrous!
â¢Banks Don't Like Short Sales And Prefer Foreclosure Instead- Banks know that a short sale will reduce their losses compared to a foreclosure. Even the federal government agrees. That is why congress added short sale incentives to the recent loan modification laws. The reason is best explained by a recent study done by Boston Consulting Group. The study found that a short sale nets a lender 20% more than a foreclosure. Banks understand numbers and want to reduce their losses.
â¢The Mortgage Forgiveness Law Means That Everyone Gets To Short Sale With No Deficiency- The unfortunate news is that this is not true. The Federal Mortgage Forgiveness Debt Relief Act enables a homeowner to walk away from an upside down debt without owing taxes on the loss. In the past a homeowner that was released from an upside down debt would owe income taxes on the forgiven debt. It is called “Forgiveness of Debt Income.” The good news is that in most cases a homeowner can short sale and walk away from the debt. But, it doesn’t happen every time.
Important Notice Michael Swift and J. Rockcliff Realtors, are not affiliated in any way, shape, or form with the government. Our services have not been reviewed or endorse by the government or a lender. Most lenders willingly work with agents on short sales. Why? Because most short sales are beneficial to a lender. The lender, in most circumstances, will end up with more money than if they foreclose on the property. The likelihood of negotiating a modification is like everything else in life. It takes work and persistence to convince your lender to modify your loan. No matter what anyone does, the lender may still not approve a loan modification. Our team offers a complimentary, a step-by-step loan modification instruction manual to help guide our clients through the process. It is not recommended that anyone stop paying their mortgage, because this will cause damage to their credit and could cause them to lose their home. Because we know avoiding foreclosure is so important to any homeowner, we recommend that you speak with the appropriate legal or tax advisors before making any decision. We offer a FREE 1hr consultation with a real estate attorney to help you go over all your options and liabilities. The views expressed here are Michael's personal views and do not reflect the views of J. Rockcliff Realtors.