is when a home owner cannot make his payments andÂ has (or is about to) gone in
default. They contact the lender and get approval to try to sell the home at a
loss to the lender before the lender forecloses.Â The problem with short-sales
is that lenders take 60 to 90 days to answer an offer, and during that time
other offers are still coming in....then they choose to answer the highest and
best.Â So buyers can waste several months for a lender to simply say NO.Â
the advertised price on a short-sale hasÂ NOT been approved by the lender,
so in many cases the lender will respond with a higher than advertised counter
offer, or ask you to pay allÂ the back fees to HOA or any liens.Â I do not
recommend buying short-sales unless you are an investor with lots of time for an
answer and nothing to lose if the offer is rejected.Â Words that may alert you
to a short sale situation include: Short-Sale, pre-foreclosure, 3rd party
approval required, "Listing price may not be sufficient to pay the total of all
liens and costs of sale".
On the other hand,
aÂ Foreclosure is already lender owned, they want properties to
sell fast, they answer offers in about 7 days and usually want a transaction
closed in 30 days.Â When you buy a foreclosure they give you a guaranteed clean
title (no past taxes, HOA's, liens, etc.). Other words that describe
foreclosures are REO (Real Estate Owned) and Corporate Owned. A foreclosure begins as a "Lis Pendens", when the lender/bank communicates to the resident they will begin the process of foreclosing on them. The Lis Pendens depending on which state could take from 1 to 2.5 years.
sale is when the owner has been living in the property for several
years and has equity built up.Â The owner sales free and clear.
There are "offers". ThereÂ are
no "bids", since bidding only happens at auctions.Â Foreclosures are priced at
correct market value, however in some circumstances you may offer below
asking price.Â If it is a new listing, there might be several offers...and the
bank will give all interested a chance to improve their offer before making a
final selection.Â This process is called a Highest and Best
round. Â If it is a listing with over 60 days on the market or with significant
damageÂ then you can get usually get it below advertised price. Price also
depends on market location.