Foreclosed property versus Short sale?

Asked by Largo Di, Clearwater, FL Sat Sep 12, 2009

I realize a foreclosed property is owned by the bank and would think should be easier to get than a short sale, but how much easier are they to do interms of waiting and actually closing?

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Pamela Cohn, Agent, Clearwater, FL
Sun Sep 13, 2009
Largo Di,

Good information given. Ask yourself the following.

1. Do you have to be moved in a certain time frame? If so do not consider "short sales". Often the Lender on a short sale will not even do a BPO (Broker Price Opinion) until they receive an offer. The list price may not even be acceptable. Have your realtor check out the debt ratio to list price. As the first offer, you may just be a guinea pig to get the ball rolling. Once they do BPO they need to decide if they are willing to do a "short sale" vs. "foreclosure", determining where they will lose less. And then there is the wait to see if they can get a better offer. This waiting period is usually 45 plus days. If there is more than one lender the chances of closing decline drastically.

2. What is your financing situation? If you are looking at a "Short Sale" or bank owned, they are going to be examining your ability to pay. They don't want to end up in the same situation a couple of years from now. A larger down payment or cash is going to carry weight in these situations, especially if there are multiple offers. As the others have stated, if it looks good to you it probably will to others also. You need to see them as soon as they hit the market and move quickly. Those who think that because it is a "Short Sale" or "Bank Owned”, they can go in with a low offer are wasting their time. These are the Sale Prices. If the bank owned property has not been on the market at least 100 days, don't be looking significant price reductions. Have your financing in order before you start looking. If you are paying cash you will need to show proof of funds.

3. Which will close faster? I would say almost always, if not always, a bank owned property closes quicker, and it closes. Short sales can run on with the buyer in limbo for months, only to find out a second lender won't agree and it becomes a dead deal.

4. Important point Loretta brought up.... Why only look at short sales or bank owned? Presumably you are looking for the best deal. It very well could be an estate sale or a motivated seller with equity that HAS to move. Don't limit your options. Discuss your home requirements with your realtor and then let her find the best choices out there that meet your needs.

If you are not already working with a realtor, I 'd be happy to assist you. I have a free service called “Listingbook”, which I provide for my clients. It is like a back door into the MLS, which updates daily: price changes, solds & withdrawns, allowing you to really be able to follow and learn the market. I set up a basic search according to your guidelines. Once you are in, you can change the parameters, as you need. If this is something you would be interested in let me know.


Pam Cohn
Broker Associate, GRI, CDM
Prudential Tropical Realty
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Annette Law…, Agent, Palm Harbor, FL
Sun Sep 13, 2009
Good question which I think every buyer seems to have on the very top of their mind. James gave great advise. Night & Day difference. If you love living in a protracted state of uncertainty, then short sales are the best show in town. Short sales, which I call the wild, wild west of real estate, exposes buyers and sellers to way to much liability if those involved are not bound by professional standards. Many of the cases I studied in Largo, Clearwater, Dunedin and Palm Harbor, the successful short sales of desireable properties sold for approximately $6,000 less than traditional sales. Wait time ranged from 4 months to 18 months!!! I was unable to determine if the sale was completed with the first buyer, subsequent or back up buyers.
Bank owned properties have similar closing wait times as traditionally sold homes. The major delays are associated with buyer financing, not the bank owner. When you are looking at bank owned properties that are in move in aware that if you like it someone else will also. Bank owned homes in premium locations and in good condition sell quickly.
For more information about what's happening "behind the curtains" related to short sales, come to the public seminar on Sept 26, Saturday at 10 AM, hosted by Clearwater's real estate attorneys discussing and answering your questions about foreclosure defense. This is free to the public. You will need to call to reserve a seat and get the location.
Annette Lawrence
ReMax ACR Elite Group, Inc
727. 420. 4041
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Debi Anderson, , Clearwater, FL
Sat Sep 12, 2009
Hi Di -

Bank Owned (aka REO, Forclosure) properties can close rather quickly depending on your situation. Will you be paying cash, getting a conventional loan, or an FHA loan? Often there is much competition on these properties so you must be prepared to move quickly by having your financing (if you are financing) ready.

Short sales vary depending on which lender holds the mortgage. It can take several months to close. If you have the patience, this can work out. If you need to get into a home quickly or want to take advantage of the Tax Credit, short sales are not a good option at this time.

If you are buying the home for a primary residence, it is most important to work with a good Realtor who you trust and that you find just the right home with just the right financing. I'd love to meet with your to discuss your specific needs. Feel free to contact me at: 727-424-2863 or

Best Wishes!!
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Loretta Buck…, Agent, Palm Harbor, FL
Sat Sep 12, 2009
Great question, Largo Di!
These days, at times it can be hard to distinguish between the two, since some banks are throwing foreclosures up for sale before having actually cleared the title work!

The differences are primarily that foreclosure homes are generally going to have much more competition, since so many buyers do not want to wait for an answer on a short sale. In the past, short sales were typically in much better shape, since the sellers were often still in the home and maintaining it up until sale, however now the banks have started doing some rehab work on many of the properties in an attempt at better marketability.

The best possible scenario, and the one I use with my buyer clients, is simply to examine all of the homes in a particular price range, because there are motivated sellers who are simply pricing their homes competetively in an effort to get a quicker sale.

So: use a Realtor (such as myself, for instance...) who can help you weigh the pros and cons, adn good luck in your home search!
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James Moran, Agent, St Petersburg, FL
Sat Sep 12, 2009
Largo Di,

It's like night & day. I've handled the buyer side of a significant number of bank-owned (REO) properties & avoid short sales like the plague. After the bank has put a house on the market that they have obtained via foreclosure they are extemely motivated to find a buyer & quickly for the most part. They know exactly how much they have been stuck for & have at least a good idea of what they can get for the property in today's market.

Response time from the bank/seller takes anywhere from less than 24 hours to as long as a couple of weeks. Compare that to literally several months for most banks to respond to a short sale contract. It can easily take 3-6 months for most short sales to close - if they do.

If I can be of any help in acquiring a REO property please email or call the office number below.

Jim Moran
Broker Associate/Realtor
Prudential Tropical Realty
727-799-2227 ext 223
727-278-4711 Cell
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