5 Common Foreclosure Myths That Cost Homeowners a Fortune

 

Which of these misconceptions do you believe, and how is it going to hurt you?

Myth #1

No matter what I do, I'm going to owe money to someone." On most short sales, the seller is able to walk away owing the bank nothing. Of course, it's all up to each individual bank, but eight times out of ten, you can walk away owing nothing. A bank loses way less money on a short sale than a normal foreclosure. In return for you helping them out, they might help you out. Here is why there is this big difference between a short sale and a foreclosure.

On a short sale, the utilities are turned on and someone is living in the house (if you choose to) a vacant home is a bit harder to sell. The buyer knows the house is bank owned and will adjust the price accordingly. On a bank owned property, the home sits there for 6-9 months empty before it sells. The bank has to pay to keep it up and insure it. They can't loan that money out and collect interest. Also there's the liability if some kid goes into the house and gets hurt, or if the house is vandalized. Because of  that the banks are keen to do short sales and very willing to work with you.

Myth #2:

A foreclosure will go off my record in 3-5 years." Yes, you might be able to get a loan after 5 years, but here's the problem; when you walk away, the bank will come back and get a judgement for the money they loose, and also any money they ahve to spend in the foreclosure process. They'll add attorney's fees, late payments, interest, maintenance, lawn mowing costs, realtor fees, locksmith costs, title insurance and all sorts of other fees. This judgement will stay with you until you pay it off. Let's say you owe $200,000 on your home and it's now worth $170,000. According to a study done on this, if you do a short sale, the bank will loose 19%. But if the bank takes back the house and waits to resell it, they will loose 41% on average. That means you could owe them about $82,000 on average on the judgement amount.

This deficiency converts to a judgement and judgements can last up to 20 years here in Florida. Most of the time, the bank itself will not come after you, but they will sell the right to collect the monies to a third party collection agency. That company will then attempt to collect from you.

Have you ever experienced the calls you get when you get behind on a credit card? those people are vicious! They just keep calling and contacting you non-stop. Not only that, but they will drag you to court and ask for all your financial information. They can force you to bring in your bank statements and information on retirement accounts such as IRA or 401k. And if you don't bring this information, they can have a warrant issued for your arrest. You may have no prior criminal history, but you will after that. The court gives judgement collectors a lot of ways to go after you. They can send a police officer out to your home to seize anything valuable. Do you have a nice TV? They might take that, is your car paid off? If it isn't absolutely necessary for you to use it to get to work, they can take that too! No one will give you a loan with that judgement on your record.

The worst thing is that this debt purchasing company will be going after you for 10 years or even longer. They will do whatever they can to collect what they think is "their money." Even you current and future employment might be affected because many employers now require credit checks.

Myth #3

A short sale will take 8-12 months and can drag out even longer. This is the case when the person you are dealing with doesn't know what they are doing. Our short sales average 45 to 90 days. We do these every day, day in and ay out. In fact, we have done short sales with banks ranging from Chase, Bank of America, Bank United, Wells Fargo, Aurora, Indymac, Wachovia and many others..  The difference between dealing with someone who knows what they're doing is this. It's like the difference between hiring a top dog lawyer for a lawsuit vs. hiring your friend who isn't a lawyer.(We are not lawyers not do we claim to be one)

When we work with you we will handle everything and do all the work. All you we require from you is to provide us with any and all documentation the bank might need. We will handle all negotiations and keep up updated as to what's going on.

Myth #4

Banks and Lenders Rarely Accept Short Sales. The banks often tell you they won't take a short sale. The reason is, they want you  to pay them the full amount. Or, they want you to get you to agree to pay them monthly for the rest of your life.

We are able to get short sales accepted most of the time. Here's why your bank may have already told you they will only take "X" amount. But let's say someone owed you a lot of money and they wanted to pay you only half of what they owe. What would you say? You'd probably tell them to pay you the full amount, right? But if the person came to you with cash and told you they just simply could not afford to pay you any more, what would you do? You'd probably accept whatever you could get, right? Well, it's the same with a bank.

The banks often tell you they won't take a short sale. The reason is because they want you to pay them the full amount. or, they want to get you to agree to pay them monthly for the rest of your life.

 

Myth #5

I can tell you one thing, Fannie Mae and Freddie Mac, who hold a large portion of the mortgage loans in the U.S. don't think so. They recently changed their requirements. Fannie Mae only requires two years on a short sale before you can get a new loan. If you give the house back to the bank, you have to wait for five years. Several new requirements now apply  that can drag this out to 7 years. These companies are the backers of more than half of the loans issued today. This makes foreclosure more damaging than even bankrupcy, which requires a 4 year wait.