Loss Mitigation Options
Myth Busters: Dispelling Misconceptions
Homeowners who have fallen behind with their mortgages are often frightened and confused. There are a number of short sale myths.
Myth #1: Short sales take up to 18 months to close
Approval of a short sale can take as few as six weeks or up to four months.
Here’s a typical process for a short sale:
It takes any where from seven days to 1 month for the lender acknowledges a completed short sale package (which consists of the seller’s documents and the buyer’s offer)
A negotiator is assigned to the case and conducts a broker price opinion (BPO). This adds 30 to 60 days to the process.
The file is reviewed, which can take an additional 30 to 60 days
The short sale is then approved or rejected which can take 60 to 120 days
Myth #2: Short sale buyers pay too much
Banks don’t want to own houses and agents only make money when the homes sell. It’s not unusual for a listing agent to price a short sale below market value. Banks prefer market value, but will consider a price 90% of the full market value.
Short Sale Myth #3: Short sale banks won't accept a severely discounted payoff
Home values have dropped in many places around the country and certainly in Northeast Ohio. Home sellers are frequently surprised to learn their home could be worth considerably less than what they purchased it for. Banks certainly understand this phenomenon.
Short Sale Myth #4: Short Sale Sellers Must Be in Default Before the Bank Will Approve a Short Sale
Banks make short sale considerations based on the hardship of the homeowners. They look at a number of factors including:
*How far the properties home value has dropped;
*if the mortgage is in or very close to default status; and
*the financial situation of the home seller
A homeowner can actually be current on the mortgage and still qualify for a short sale (and also be immediately able to purchase a new home under Fannie Mae rules)
Short Sale Myth #5: Agents get paid a lower commission
A few years ago banks were cutting commissions for agents, but more recently (since 2009) banks have paid agents more traditional commissions or at least close to more traditional commissions. Additionally, in February of 2009 Fannie Mae initiated a compensation policy in which the Fannie Mae agreed to pay commission between the listing agent and the seller, providing the fee does not exceed 6%.