The Real Estate Short Sale Fallacies

The term "short sale" in the real estate industry is becoming more commonly known to the general public. Even with these non-conventional types of transactions, there are many beliefs and misconceptions about what a short sale is. A more appropriate term would be "long sale" which in turn would eliminate some of the confusion up front. Since short sales do not seem to have an end in sight we can help to clear up some of these fallacies.

Fallacy 1 - Short Sales are not much different than a conventional sale - A buyer writes an offer on a short sale and the seller is occupying the home. The seller accepts the offer. Now the buyer is excited and ready to move forward. Even though the offer was accepted, it is contingent on the seller's bank approving the offer. First of all, if you hear back from the listing agent or the bank in less than 3 months, consider it a miracle. When you do hear back, many banks approve offers but change all the terms in the original contract.

Fallacy 2 - A seller should walk away from the home rather than try to short sale the home - If the bank does not approve a loan modification, then the homeowner has no choice but to either catch up on their payments if they are behind, or try to "short sale" the home. Walking away from your home sometimes is unavoidable. However, with the new Fannie Mae policy, be sure this is your only choice or Fannie Mae will actively pursue you to recoup your financial obligation.

Fallacy 3 - Another definition for short sale is pre-foreclosure - A pre-foreclosure means the homeowner is at least 3 months behind on their mortgage payments and foreclosure proceedings have begun. A short sale does not mean a homeowner is behind on their payments. It only means they have encountered some sort of hardship and are electing to sell their home for less than what the home is worth based on the current market.

Fallacy 4 - Most homes are bought and sold with emotion so I will explain to the bank how much I want this home. This reasoning sometimes works in a conventional sale but will NEVER work with a short sale. Why? Because banks do not care about buyer's reasoning, their only concern is the bottom line net figure.

Fallacy 5 - The seller accepted the buyer's offer so the bank has to honor the contract. This is so untrue. Since the bank has the right to approve or disapprove this type of sale, this means they are forgiving debt that was the legal responsibility of the homeowner. Banks have the power to change any of the terms to their liking. They can counter offer with a higher price than what the home even was listed at. They can change inspection periods, refuse to pay closing costs, and charge the buyer a per diem fee if they do not close escrow per their terms.

Dealing with real estate distressed properties is a challenging and difficult process. The seller's agent and the buyer's agent have to be extremely educated and knowledgeable with the short sale process. The banks all have different rules, contracts and addendas. If the agents do not have the experience with a variety of banks, there is even a greater risk the deal will not close escrow. This will create a very good chance their reality will become fallacies.

Exclusive representation to buyers and sellers is a complex venture. Real Estate Homes, LLC philosophy has accomplished this with great success. For more information on distressed homes and information Phoenix Homes for Sale or Tucson Homes for Sale, please visit Real Estate Homes, LLC where you can search for all available homes for sale.