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Antonio Vega-pacheco's Blog

By Antonio Vega-Pacheco | Agent in 34747

Foreclosure vs. Short-sale... in SIMPLE terms

A Short-sale is when a home owner cannot make his payments and 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.  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.  So buyers can waste several months for a lender to simply say NO. 

Also, the a
dvertised price on a short-sale has 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 all the back fees to HOA or any liens.  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.  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, a 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.  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.
 
Traditional sale is when the owner has been living in the property for several years and has equity built up.  The owner sales free and clear.

There are "offers". There are no "bids", since bidding only happens at auctions.  Foreclosures are priced at correct market value, however in some circumstances you may offer below asking price.  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.  This process is called a Highest and Best round.  If it is a listing with over 60 days on the market or with significant damage then you can get usually get it below advertised price. Price also depends on market location.

Comments

By Priscilla Hammond,  Sat Nov 10 2012, 15:53
This is great info on foreclosures and short sales.
By Nilsa tanco,  Fri Mar 8 2013, 14:22
Great way of explaining it!

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