Five Common Short Sale Myths
- The bank would rather foreclose than deal with a short sale. This is not true at all. Banks generally would rather negotiate with a homeowner to short sale a home, than foreclose on a property, because the foreclosure process is very costly to the bank. Many banks offer incentives to homeowners who agree to short sale their properties, sometimes as much as tens of thousands of dollars, depending on the value of the property.
- You must be behind in your mortgage in order to negotiate a short sale. This was often true in the past, but currently banks are looking for financial hardship, rather than mortgage delinquency, as a reason to negotiate a short sale. Financial hardship can include the loss of a job or income, health or medical issues, an increase in monthly payments from an adjustable rate mortgage, or even an extraordinary loss in home value.
- There is not enough time to negotiate a short sale when the bank is threatening foreclosure. The foreclosure process can be quite lengthy, often taking years. Most banks are willing to stall a foreclosure if there is a chance to negotiate a short sale. Remember, in most cases banks prefer to short sale a property, rather than foreclose on it. Even when a foreclosure sale date has been set, the bank will almost always stall the foreclosure if there is a valid contract on the property.
- After a short sale, the homeowner will be forced to declare the loss as income. Currently, the 2012 Mortgage Forgiveness Debt Relief Act protects the homeowner from having to pay taxes on the deficiency that is waived by the bank.
- Short sales always take many months to close. Many short sales can be closed in 30 to 60 days. The most important thing to consider when dealing with a short sale is the experience of your short sale negotiator. Choosing a skilled short sale negotiator who knows how to negotiate through the short sale process efficiently will mean that the short sale is closed faster and more smoothly.
Stephen is a real estate lawyer specializing in loan modifications, short sales, foreclosure and much more. He is also the owner of his own practice, the Law Offices of Stephen Hachey, PA. This article is for general informational purposes only and does not establish an attorney-client relationship. Please contact a licensed attorney in your state of residence. For more information on Mr. Hachey's services, please visit his website at www.floridarealestatelawyer.org/.