There are a number of short sale myths floating around.  Today I'll "de-myth" a couple and explain why.  The following summary information is courtesy of the Distressed Property Institute.

Myth:  Banks want to foreclose instead of taking a short sale.  NOT true.  Banks are in the lending business, not property management and much prefer to get the property off their books.  If a person is qualified for a short sale, banks must consider the short sale.  Banks come out ahead with a short sale because they lose far less, almost always, than going through the entire foreclosure process.

To qualify for a short sale a person must 1. exhibit financial hardship; 2. have a demonstrated monthly income shortfall; and 3. insolvency, that is you do not have sufficient liquid assets to pay down your mortgage.

Myth:  You must be behind on your monthly mortgage payments to negotiate a short sale.  NOT true.  In the past, before short sales became so common, this may have been the case, however no longer.  Lenders are now looking for a verifiable hardship, montly cash flow shortfall or pending shortfall and insolvency.

Myth:  There is not enough time to negotiate a short sale before foreclosure on my property.  Again, not true.  Although a short sale is a lengthy process, it is just that, a process.  There is time, unless a seller has waited until the last second when the home is being auctioned on the courthouse steps.  Many lenders will delay foreclosure proceedings with a phone call from an owner explaining an honest attempt to sell, and if there is a legitimate contract, this almost always forestalls the foreclosure.

Next time, we'll address a few more myths about short sales.  Remember the parts to qualifying for a short sale:  1. financial hardship; 2. monthly income shortfall; 3. insolvency.

For more details, contact your local Certified Distressed Property Expert.