Back in the early to mid 2000's it was not uncommon to go to a bank and ask for a three hundred thousand dollar loan with no money down, minimal credit, and get approved. The same rule applied for someone when getting a HELOC(home equity line of credit) loan for thirty to fifty thousand dollars above and beyond what their house was even worth. With the current housing crisis, lending has changed from one extreme to the next. Houses that have been over leveraged are now in a position where they are not able to sell because their mortgages are more than what the house is worth. Because of this, short sales have become very popular in the process of helping homeowners get out of bad situations.

According to The Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, they were up at the end of the first quarter in 2011 to a record high of 19.6 percent of all active real estate listings. As they are more common then ever, it is very important to make sure you take the right steps and eliminate any mistakes when trying to complete a short sale on your house.

Here are 5 of the most common mistakes homeowners make when trying to complete a short sale on their property.

1. Not being knowledgeable with the process.

This may deal with not only you the homeowner but also the Realtor you hire to help handle the short sale. A big misunderstanding is thinking lenders will help you through the process. Lenders are busy and don't have time to explain details of the process. They expect you to know how the process works and know what kind of paperwork is needed to start and complete the short sale. Not having an understanding of how the process is handled will hurt your chances of a short sale being completed.

2. Trying to get a low ball offer accepted.

A big misunderstanding about short sales comes from buyers who think they can submit an extremely low ball offer and the lender will accept it. What buyers need to understand is lenders hire multiple BPO's(broker price opinions) to get them an accurate as-is market value price. Now that Lenders are doing more short sales than ever before, they have become more confident with their processes and will not take much of anything less then an as-is appraised value. When submitting an offer remember that lenders are not ignorant of a property's value and work hard to keep every penny of equity as possible.

3. Starting with an incorrect pricing strategy.

This is another big mistake made by inexperienced homeowners and Realtors. When listing the home for short sale, the goal is to be as realistic as possible when listing the house at an as-is market value. This is done to prove to the bank that an honest effort was made to sell the home at market price and then failed. From that point, the asking price may be lowered to a point that a buyer may be willing to pay. This strategy takes experience and patience but does prove success with banks.

4. Not having the proper paperwork the bank requires.

Now more then ever, banks are overwhelmed with mortgages and are handling more new defaults everyday. The people at the bank in charge of receiving short sale packages are also overwhelmed and will not take the time to deal with incomplete paperwork packages. They have a certain checklist that has to be met and completed to pass their desk. Without being filed out correctly, the package will typically go right into the trash so they can move on to the next package. Make sure you and your agent take the time and put together a proper and complete short sale package in order to have a chance of getting a short sale underway.

5. Bad timing.

The timeline of a short sale is critical when in has to do with proper completion. If the processes are not completed within certain timelines, they will not be approved and everyones time will be wasted. Every state is different when it comes to foreclosure laws and timelines, so understanding when a house should be listed, BPO's ordered, offers submitted, or anything else is critical when completing a short sale fast and efficiently.

In conclusion, short sales have become a critical strategy in this current real estate market and are becoming more and more favorable for everyone involved. Not making mistakes is very important. As a homeowner, being knowledgeable about the process is very important as well as the Realtor you hire that has experience. Because the real estate market changes everyday, keep an eye on the processes and how banks are operating to maximize your chances on an approval.