A short sale can be an excellent solution for homeowners who owe more on their mortgage than the home is worth. A short sale can wipe out deficiency liability and keep the homeowner in their home for an extended period during negotiations. Unfortunately, there are a number of misconceptions and myths about short sales that dissuade homeowners from seeking that protection or mislead them into working with a non-attorney real estate agent.
Myth: The Bank Would Rather Foreclose on the Home Than Complete a Short Sale
Short sales actually bring the bank more money than they would receive in the foreclosure process. This myth that the bank would rather foreclose remains prevalent because of the extreme difficulty people face during the loan modification process. Those people assume the bank is playing games just to get to the foreclosure. However, the truth is that loan modifications simply don’t work, and the bank has no real choice but to push through the loan modification to satisfy regulators and the public. Most people believe the bank would prefer to go through foreclosure because the bank is giving them such a hard time on the loan mod. Once that same homeowner switches to the short sale, the bank becomes more agreeable and will assist them in avoiding the foreclosure.
Another reason that most people believe the bank would prefer foreclosure is because more than 50% of all short sales handled by “local” real estate agents end in foreclosure. The perception held by homeowners is that those transactions were doomed because of the bank. In reality, it was the failure of the real estate agents and their limited tool set that led to the foreclosure rather than a successful short sale. As an Attorney/Realtor® I have far more tools and skills at my disposal and can push through a short sale where others would fail. Please see the resources on our website www.LawyersRealtyGroup.com regarding why traditional real estate agents are not qualified to handle short sales.
Myth: You Must Be Behind on Your Mortgage To Complete a Short Sale
While this might be an unavoidable situation if your loan is unaffordable, there is no requirement that you be in default to complete a short sale. We have completed a number of short sales in Southern California where the homeowner remains current on the mortgage. As an Attorney/Realtor® I am able to break through to the bank even if you are current on your mortgage and have them open a short sale file. Additionally, you need the assistance of an attorney in presenting your situation in the hardship letter. You don’t want to say the wrong thing and kill your chances of obtaining a short sale.
Myth: There Is Not Enough Time To Negotiate a Short Sale Before My Foreclosure
This can be a serious problem if the homeowner is using just a “local” real estate agent rather than an Attorney/Realtor®. Lawyers Realty Group can deploy the force of law to push the foreclosure date out and gain the cooperation of the bank. Nevertheless, we advise that the homeowner reach out to us as soon as possible so we can get started right away. Once commenced, the process is very slow but the foreclosure date will be postponed as long as the bank sees that we are working in good faith toward the short sale solution. Your risk of failure is almost 90% in these situations if you use a non-attorney real estate agent.
Myth: Short Sales Are Impossible and Never Get Approved
For the most part, there is truth to this statement if you are using a traditional (“local”) real estate agent. The statistics show that a majority of short sales fail if they are handled by a traditional real estate agent or short sale “expert.” However, with an Attorney/Realtor®, you are getting full and complete representation along with the power of California law. This allows a near 100% success rate on our short sales. Only in the most desperate situations are we not able to complete a short sale (i.e. three or more loans on the property, extensive IRS or FTB liens on the home or environmentally damaged land). Please see our article on “So-called short sale experts” at www.LawyersRealtyGroup.com.
Myth: Buyers Are Not Interested in Short Sale Properties
This is a myth that homeowners hear all the time. The truth is that buyers are not interested in a short sale that they don’t believe will close. If you look at the information above, you will see that traditional real estate agents don’t have good success rates. Thankfully, this is not the case when you work with an Attorney/Realtor®. Buyers appreciate the skill and certainty that an attorney brings to a short sale. That’s why you see so many properties listed with a statement like “short sale negotiated by attorney”. This scam is being used by real estate agents to attract buyers to their listings. They hope to piggyback on the credibility of the attorney, but what buyers don’t understand is that the homeowner is not actually represented by an attorney at all. In fact, the person actually doing the negotiations for the short sales is not an attorney either. They are minimum wage employees that make the calls into the bank. At Lawyers Realty Group, the homeowner is directly represented by an attorney. We regularly receive multiple offers on the properties we list. The agents for buyers recognize Lawyers Realty Group and know that we get the deal done.
Myth: Not Showing the Home or Not Signing an Offer Will Slow Down the Process and Keep Me in the Home Longer
The opposite is true. You must get the lender engaged in the process in order to get the postponements. It is a “slow and steady” process. If you move steadily forward, the bank will take care of the “slow” part because they are completely incompetent and inundated with work. In fact, the quicker you get an offer into the bank, the more likely that you will get many extensions of the foreclosure sale date while the bank works through their process. We typically have to sell the property more than once because the bank takes so long in the process that the first buyer finds another property to buy in the meantime. This is not a problem because we get multiple offers on most properties we list for sale. We watch the foreclosure process very closely and we are prepared to use the legal process to stop a foreclosure sale when needed.
Myth: I Need a “Local” Agent To Get the Property Sold
In fact, this myth compounds the myth that short sales aren’t successful. Local real estate agents have an extremely high failure rate. Therefore, using a local real estate agent increases the likelihood that your short sale won’t be successful and you will face foreclosure, eviction and deficiency judgments. You don’t need a local agent; you need an Attorney/realtor® to present you with every possible option and the highest chance of success. Real estate agents have very limited skills in this realm, even those with the weekend short sale certifications (such as CDPE or SFR). They are not trained in difficult legal (adversarial) negotiations, which is what a short sale settlement is. They are not trained in the legal process, which is what the foreclosure action is. They are not trained to protect you from legal and tax consequences, which is why you are seeking a short sale in the first place.
So, why do people continue to believe they need a local broker? Many homeowners believe that selling the home is the hardest part, when in fact it is the easiest part of the short sale process. We close short sales from La Jolla to San Jose, with multiple buyers in each situation.
Many homeowners are also unaware that they have the option of being represented by an Attorney/Realtor® at no cost to them. There are very few Attorney/Realtors® practicing in Southern California. It is to every homeowner’s advantage to seek one out in order to avoid negative outcomes and ensure a fresh financial start.