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Today I got a call from an agent about a short sale I have listed. In talking I mentioned the current owner is not in default to which he countered "but he must be." I am here to tell you from experience, from closings, from approvals in my hand your client does not have to be in default to obtain an approval for a short sale. If the mortgage co tells you they must be ask them to show you in writing where this is their policy so you can show your client 9 out of 10 can't and this will get you past this hurrdle..
Myth #2, I get all the time, "once I short sale I can't get a mortgage to buy for some time." INCORRECT!! In July of 2011 I executed and closed a short sale on my listing and the same client was approved to purchase a new home and closed 3 weeks later. There is no rule that says you can't, if you keep your current mortgage current and the person negotiating your short sale gets an approval that say lender is going to except short sale as mortgage paid in full. We supplied the payoff (actually both it was a first and second) and credit showed always paid on time client upgraded to bigger and better house for same payment and maintained good credit.
This point brings me to myth #3 "it doesn't save me any to short sale I should let my house go and save my money." NO NO NO! See above scenario if you bide your time and pay payments till your agent can negotiate a short sale for you, you can save your credit by paying your payments and getting that payoff showing paid zero balance! Just because a bank didn't go after your friend for his foreclosed home doesn't mean they won't come after you and garnish your wages, freeze your bank accounts, or harass you till you can't stand it any more. Problems don't just go away a short sale is a proactive solution to an economy induced problem.
Myth#4 I make to much money I will not get granted a short sale....you can make 500k a year and still be granted a short sale on your house and here is why. You bought 123 Apple St for 700k 4 years ago now it's worth 200k as it stands with you in it, looking nice and clean and put together. HOWEVER if 123 Apple street is foreclosed and then has chance to be stripped down or vandalized the bank knows it will then only be worth 100k so they are better off letting you short sale then risking another foreclosure on their books which will be supported when appraiser goes out and does BPO. This also disproves myth#5 that "I owe way to much compared to what home will sell for bank will never do it." I closed a home that had a $750k loan on it but appraised only for $295 so bank allowed the short sale after they did their bpo and we sent copy of FHA appraisal.
Myth 6 my agent is a "short sale expert" I'm here to say I have been doing short sales since 2006, I was taught by a bank how to structure and execute them and still I am not an expert and I'll tell you why. You can not be an expert at something that changes with every file, every day. You can be very good, you can be excellent but not an expert. There is no such animal for short sales.. I give the example that a short sale is like a snow flake, every single one is different! I have closed one in two weeks YES TWO WEEKS but in the same token I have had one take eight months. The eight monther was a first and second for a divorced couple with a husband that claimed bk on the second but none the less it took eight months to get to closing. I am great at them and many others are too but be wary of the self proclaimed expert as often they over promise and underperform.
These are all just my experiences as stated earlier there are many others out there and every file differs but I think education is important as many agents are telling people they can't when in fact they just don't know yet that they can! :-)