Some good answers here, but let me tell you what the REAL difference is between a short sale and Foreclosure (REO).

Motivation.

In both types of sales, it's ultimately up to the bank (servicer, investor) to decide if they will take the offer. In the short sale situation, the motivation seems to be quite a bit lower. Why is that? I believe it's because when it's a short sale, the current owners are paying all the bills. Utilities, insurance, property taxes, all the costs associated with owning a property. When it becomes property of the bank as an REO, they suddenly start having to paying the holding costs.

Investors REALLY don't like this. It's one thing to not get paid back on money you've loaned, it's quite another to suddenly get hit with bills stemming from that loan! They want to sell it as quickly as possible and they will be much more aggressive on value.

A short sale is an attempt to sell the property before foreclosure. It requires that the lenders or other noteholders take payment of less than the balance due on the note, "short payment". If one of the noteholders forecloses, that means they take the property back. Then they usually sell it to recover what they can. If the new seller is a bank or corporate entity, it may be called an REO, which is lender lingo for "Real Estate Owned".

A short sale is when the property is still in possession of the owner. It could be in foreclosure or it may be the owner just owes more then it's worth. The owner lists the property as a short sale hoping to negotiate with the bank to take less then what is owed. Once a contract is submitted to the bank. There is a long drawn out process that the bank goes through including; getting all financial statements from seller, getting BPO's done, etc. This process can take up to 6+ months. Which in the end could end up with the bank just saying no and just foreclosing on it.

A foreclosed (Bank Owned) property is when the bank has taken possession of the property. These properties tend to come on the market way below market value in hopes of getting multiple offers and getting the highest price. These properties move very quickly, usually sold within a day or so. If you are buying this type of property, you have to have all your finances in order to make an offer. The less contingencies, the better the chance of getting the property. You can not come in under asking price most of the time. Usually these properties sell well above asking price.

Geoff Rossman
RE/MAX Tropical Sands
(941) 544-3232 http://www.SiestaKeyTropicalCondos.com