What Is The Difference Between A Short Sale And A Foreclosure?
2010 is a year that will have a lot of highlights, in real estate it was the year that Short Sales and Foreclosures were as much as 30% of our market. Those two terms are very popular, but sometimes misunderstood. Once I had a buyer ask why they call them "short" sales, when it takes so LONG to get to closing!
Many are still not exactly sure what is the difference between a short sale and a foreclosure. Both are challenging transactions both for buyers and sellers, and no question, both take a lot of patience to get to closing.
The main difference is who actually owns the home. In a short sale, the owner is a real person, mr or mrs "smith," while in a foreclosure the owner is the bank, who took the home back in a foreclosure action.
SHORT SALES are situations where an owner must sell their home, and the amount they owe on mortgages is more than the amount they can sell the home for in the current market. A short sale is only attainable, if the current owner is suffering a hardship that requires a sale. Hardships include: divorce, loss of job/income, or death of an spouse. A short sale is not necessarily a "deal" or a great buy, it is normally the market value; unfortunately the owner owes more than what that market value is, at this point in time. Once an offer is accepted, it can take anywhere from 1-12 months to close. It all depends on who the bank is, and how far the sellers and the bank have gotten through the short sale approval process.
FORECLOSURES are properties that are owned by the bank. They were in foreclosure, and after the proper timing and procedures the home was sold in a sheriff sale in order to pay off the current mortgage. The home then goes on the market as an "REO" or Real Estate Owned by the bank. There is an asking price, and once an offer is accepted, it takes 2-4 weeks to get to closing. I had some great tips on buying a foreclosure in a prior post.
It takes an extreme amount of patience to buy either type of distressed properties. A recent buyer, Meg & Tim Zei have this to say about their recent foreclosure purchase: "I wanted to walk away more than once. Once you make the decision that you CAN walk away if you need to, it's much easier to sleep at night."
If you are looking for a new home and considering a short sale or foreclosure property, call me for a list of 11 tips on getting to closing.
Posted by: 
Pat Tasker
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