"If it seems to good to be true- it usually is" ~ The listed price on short-sales- often is a price that was NOT lender approved. The listing agent basically pulls an asking price out of the hat [ usualy the asking price is determined by obtaining comparable listed and sold properties that are similar]
In foreclosures, the lender has already gone through the legal process of taking ownership of the property from the defauling owner. Generally, the process of buying foreclosed [REO] properties is more direct and simpler than going through the unknown and often complex process of the short-sale.
Below is a synopsis of several articles about the differences between short-sales and foreclosures.
As previously mentioned, "short sales" are sales that require bank approval for the property to be sold for less than is owed on it, but the property ownership is still in the hands of the individual owner.
While a "foreclosure" is a sale of a property after the bank has taken ownership from the previous owner.
We would add that the foreclosure process is generally more humane than the short sale process primarily because by the time the bank has clear ownership all of the problems attached to the property have been resolved. 1st mortgage, 2nd mortgage, line of credit, liens, marital issues, etc.
Our advice is to consider foreclosures before chasing short sales in a losing cause. Additionally, only 10% of all short sale offers result in a closing. 90% of all short sale offers are a total waste of time.
We hope this information is helpful.
The "Eckler Team"
This may be something that we need to discuss "off list".
In a short sale, depending upon the facts, in most cases the sale occurs BEFORE foreclosure. That is important for a couple of reasons:
1. Owner avoid a BIG DING on their credit (keeps them from buying a home for five plus years.)
2. Lender avoid a big financial loss (10% of loan vaue).
The lender in "second position", the "second" knows that they may not do well. Some "seconds" have PMI (Purchase Mortgage Insurance) so they will make MORE if the lender forecloses...but the carrier of the PMI will LOSE.
In MOST transactions the first will pay the second a fraction (such as $500 on a $20,000 note) to "go away. If you have more questions let me know.
Anyhow - short sale is basically a homeowner still owns the home and is selling the property for less than what it's worth AND must prove a financial hardship.
foreclosure is bank owned (the owner has been foreclosed on already).
The differences between deals - and buying them is different as well. See the references.