1. UNREALISTIC LIST PRICE – While it's true that a lot of short sales are considered a good deal don't think that you are going to walk in and buy one for fifty cents on the dollar. Banks aren't stupid, they know what the property is worth and what a realistic price should be. An agent that prices a property too low is just wasting the seller's time, the buyer's time, and their own time!
Tip – Price your home according to the comps. There are buyers who are willing to buy at or close to Fair Market Value and this increases the chance of closing the deal.
2. FINANCIAL PACKAGE IS NOT COMPLETE – When preparing the financial package great care must be taken to include all required documentation, all the correct information, and even put it in the correct stacking order when sending to the bank. Not having everything is a sure-fire way for your entire file to end up in the trash.
Tip – Be sure to include all documentation and provide everything your agent asks for. A good agent will be aware of each bank's specific requirements and can help you prepare a complete package.
3. MISREPRESENTATION – This can happen on the buyer or on the seller's part. Sellers need to prove a hardship in order to qualify for a short sale. Telling Chase Mortgage that you only have $ 100 in your account and are completely strapped for money yet you have a Chase checking account with $ 50,000 in it is just plain silly (I've seen it happen!)
Tip: The less income and assets you show and the more liabilities and expenses you have the better your chance of proving your hardship. Be sure your numbers make sense and are legitimate.
4. INEXPERIENCED HELP – How are you doing your short sale? Are you a For Sale By Owner trying to navigate the process? Probably not a very good idea! Or did you hire your neighbor because they are a real estate agent and even though they have no short sale experience you felt silly having someone elses sign in your yard? How silly will you feel in 120 days when the sheriff is moving your stuff out of your home due to a foreclosure because the deal never got closed?
Tip: Hire a professional short sale agent. Most short sale agents charge no fees and a good agent is worth their weight in gold!
5. UNREALISTIC EXPECTATIONS – Most sellers enter into a short sale hoping the bank will forgive 100% of every penny, not ding their credit at all, no promissory note owed, no deficiency judgment, no taxes owed, and then the next day the seller hopes to turn around and buy another property. Although all of these are possible usually there is a bit of a give and take somewhere.
Tip: Have an idea of what is important to you and what your plan is down the road. If your credit score is paramount and you have a ton of cash then maybe you are better off NOT doing a short sale as there is no guarantee what affect it will have on your credit. If you don't like owing $ 150,000 more than the property is valued at then maybe it is worth it to you to have a bit of a ding on your credit in exchange for a debt discharge of well over 100k!