Short Sales Vs Foreclosures 

Wondering about the consequences of a foreclosure for a homeowner? Or maybe wondering about pursuing a short sale with your lender? Here's a brief description that explains the differences between the two and whether or not a short sale or foreclosure is an option for you. 

Definition of a "short sale" according to nolo.com- 

A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. 

What does a short sale mean for a buyer? 

Short sells often spell big headaches for buyers. The amount of response time on an offer is typically anywhere from 30-90 days depending on the lender and/or the agent's experience dealing with these types of transactions. The success rate on a short sale listing is below 25%, meaning that less than 1 in 4 ever make it to closing. The positive side is a short sale often means a great deal for buyers with sell prices running 10-20% below current market values. The saying "good things come to those who wait" certainly holds true here. 

Definition of a foreclosure according to nolo.com- 

The forced sale of real estate to pay off a loan on which the owner of the property has defaulted.  

Foreclosed homes are also referred to as bank owned or REO properties. These homes have already been reposessed by the bank or lender. 

What a foreclosure property mean for a buyer? 

The short answer is a great deal! Lenders and banks often sell these properties for well below current market values. It's not uncommon to see a foreclosure property priced so low that 10-20 offers are recieved the first day the home is on the market.  

Foreclosure properties are not always for every buyer. Foreclosure properties are typically sold as is with no repairs to be made. This stipulation can prohibit buyers from financing the home and limit potential buyers to only those with cash. The low prices of foreclosure properties often start bidding wars. It is not uncommon to see multiple offers on a property priced well below value, even in this market. Getting in a bidding war can be an uncomfortable situation for buyers and often leads to impulse decisions that one may regret later.  

Short Sales are ever changing as more and more homeowners exercise the option. It's impossible to boil down all of the necessary information into one short page and each situation is different, so please call or email us for more specifics.