I am looking at a house that is short sale. What is advantage of buying short sale vs foreclosure?

Asked by Cathy Miramontes, Chicago, IL Sat Jan 11, 2014

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42
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Mon May 19, 2014
Good morning Cathy,

I don’t think short sales or foreclosures (REO’s) are for everyone. It takes a special kind of Buyer to have the patience and the stomach for these types of purchases.

Foreclosures
• Someone else's headache. Do you really want to walk in the door to someone else's repairs and deferred maintenance? YOU will have to pay to fix it up! Do you have the tolerance for that?
• Professional Investors. Cash investors can close FAST (3-10 days). And there are lots of cash investors competing against you!
• Difficult to Finance. Banks don’t want to lend you money to buy a home that isn’t habitable! Yes, there are special programs to assist you with renovation money, but those are more difficult to qualify for.

Short Sales
• Short Sales are better for the homeowner than for the Buyer.
• You'll wait MONTHS for the homeowner's Lender to approve the short sale
• You might not get the "deal" on price you expect.

If you don’t have the tolerance for Foreclosures or Short Sales here’s my advice:

There are plenty of motivated Sellers with their homes listed on your local MLS. Go find a good Local Mortgage Banker, get prequalified, then find a great, experienced Realtor, and buy the home you want at the price you're willing to pay.

Trevor Curran
NMLS #40140

*If you thought my answer was helpful, please give me a “Thumbs Up” or “Best Answer.” Thanks!
20 votes
Good advice. Straight and to the point. Just researching Short Sales now and looking for experienced professional opinions.
Flag Fri Apr 28, 2017
continued-2 my last deal of buying a stealth short sale was an offer of 35% BELOW listed price and I was still able to get quick bank approval. We closed in 21 days from date first listed. You must remember banks ONLY want money going TO them and they HATE paying a dime for anything including necessaery repairs, appraisers, attorneys and agents. They also hate paying "cash for keys" to remove seller-squaters or tenants. I always give the seller and bank---an offer they CAN NOT REFUSE, even if it is one that is less than anticipated. Banks want green money coming in...they will try to squeeze more out of buyers later. Banks HATE paying out money---they want it ALL. So I play their game...but only if I WIN.
Flag Tue Jun 2, 2015
Interestriung but not complete. There is still another tyope listing that is quite popular in California. This is called the "stealth" short sale. This listing NEVER mentions the dire needs of the seller, or potentially high complexity of the transaction. Why list a secret short sale? Because most buyers do not want to knowingly walk into these types of problems. The listing agent figures they can trick the buyer into getting emotional about the property and have an upper hand in negotiations ie the buyer is willing to pay more rather than less, because they fell "in love" with the house or potential. I prefer stealth or secret short sales because the strong short sale and foreclosure buyers do not know this is a short sale. This seriously reduces my competition among buyers. I have many buyers tricks--all legal that can pull a whammy on the listing agent by making them think I am a newbie sucker buyer....when they try to take advantage of me as auyer "naiive" buyer.
Flag Tue Jun 2, 2015
Good answer.2810
Flag Sat Nov 1, 2014
Short sales or Foreclosure property is not advisable for home buyers. The first problem will be finding a lender for such venture. Secondly, most home buyers do not have the extent of time required for most short sales or foreclosure to close. So, where do you stand in all of these? My advice is for you to steer clear and shop for your home via regular MLS listings and talk to a reliable realtor to guide you through. ...Better still, you can contact me for the best advice towards acquiring your home.... Good luck
Flag Thu Jul 24, 2014
interesting.sounds good
Flag Sat Jun 14, 2014
Mitch Lichte…, Mortgage Broker Or Lender, Santa Ana, CA
Mon Mar 17, 2014
Whatever home you buy make sure you are paying one extra payment a year on your mortgage. Just paying one additional payment can reduce the interest cost on your loan and lower your term by 4-10 years. Or, use a Bi-Weekly Payment Program like Mortgage Saver at MortgageSaver.com. For a small cost they'll manage this for you. You'll save tens of thousands on your payments.
6 votes
You can make 13 payments a year, or bi-weekly payments on your own. You don't have to pay someone for this feature.
Flag Tue Apr 7, 2015
I am concerned about a potential new law which states that one has to own their property for 2 years in order for the profits from the sale of my farm to be mine free & clear. I am buying a little gem of a foreclosed property but needs some fixing. My mother disinherited me & left this her second property to her church. Last October her church had an attack of conscience & GAVE this property to me. I have LIVED here since 1997. So what is my potential position with the IRS. I asked all of this of them & they were less than helpful.

Dianne Vandervoort
Stephens, AR
Flag Wed Apr 1, 2015
Flag Thu Dec 11, 2014
You don't need to pay someone for a bi-weekly payment, that's throwing money away
Flag Tue Sep 23, 2014
Jacqueline S…, Agent, Chicago, IL
Sat Jan 11, 2014
Foreclosures are bank owned and short sales are homeowner owned, but they have to deal with the bank to get approvals.

In my experience people get better prices on short-sales, but they take considerably longer, due to needing to do the traditional buyer to seller transactional work, PLUS the added bank input and approvals. The bank usually needs things in a very specific format and need to get many levels of approvals on a short sale. On foreclosures, they have usually worked out their numbers in advanced.
5 votes
Thank you!!! :-)
Flag Sun Jan 12, 2014
This Broker has provided the best short answer as to the difference. However it is best to find an agent who is competent in all areas, sit down and discuss your needs and goal to come up with a plan as to how you will proceed.
Flag Sun Jan 12, 2014
Joseph Chri…, Agent, Palatine, IL
Fri Jan 17, 2014
Foreclosure (REO) Pros:
*Faster
*Easier

Foreclosure (REO) Cons:
*More expensive
*Poor condition likely
*High competition

Short Sale Pros:
*Below market value (If you have a competent negotiator)

Short Sale Cons:
*Uncertain outcome
*Time

While it's true that nationwide, short sales have a 25% success rate, and it's easy to blame the banks, but the fact of the matter is that this low success rate is usually due to operator error. The vast majority of agents or attorneys have little or no training with short sales. When a competent negotiator is used, success rates are in the 90% range. This is a complex process, yes, but it is entirely manageable with the right team in place. I am a third party, independent negotiator in business since 2006 (&IL Licensee), and when paired with a good agent and attorney, our short sale success rate is over 95%

Like any business transaction: Surround yourself with the best people.

Joseph Alfe
Short Sale Processors Inc
http://www.ssprocessors.com
See my blog at http://www.chicagoagentmagazine.com or http://www.josephalfe.com
3 votes
Jaqueline, I have closed over 1,000 short sales, and still maintain a 95% approval rate. Yes, document collection can be tricky but the real skill is in valuation disputes and actual negotiation of the banks decisions. Most agents and short sale "experts" are just processors. We are negotiators. There is a huge difference.
Flag Sat Jan 18, 2014
Excellent answer. I have 100% success with short sale listings, but I have only done 2 with each having 2 mortgages. You will be sending and uploading the same documents 3-5 times.
Flag Fri Jan 17, 2014
Manuel Brown, Agent, Chicago, IL
Tue Jan 14, 2014
Dear Cathy,

You can get a great deal in a short sale. However, be ready to be patient once you make your offer. It can take as little as 60 days to close or as much as 8 plus months.

You will want to work with a buyer's broker that knows what questions to ask. Sometime when we know where they are in the process in the short sale and if they are using an experienced short sale attorney we can guesstimate the time.
3 votes
Joe Schiller, Agent, Chicago, IL
Sat Jan 11, 2014
what are the 20 disadvantages of a short sale you mean?? do not waste your time. Short sales are for the most part poorly managed by banks
3 votes
Ivan Sagel, Agent, Chicago, IL
Sat Jan 11, 2014
Cathy,

A foreclosure is similar to a traditional sale only the seller is a large corporation not an individual. A short sale is completely different. The seller is an individual, but the seller's lender needs to agree to take less than they are owed. The short sale process usually takes 3-6 months and the answer from the lender might be "no deal" or the lender may require a higher price then the asking price of the listing.

Only buy a short sale if you are prepared to wait 6 months for an answer that might be a no deal.

Warm regards,

Ivan Sagel
312.515.7823
ivan@atproperties.com
3 votes
Considering a condo short sale.Lising agent says lender has had it on market 4 years. Not taking any more contracts. Listing price way below market value. Is 4 years unheard of ? Seller happy with listing price. I should "walk" but like the property.Comments welcome.
Flag Sat Aug 1, 2015
Jack Lewitz, Agent, Lincolnwood, IL
Sat Jan 11, 2014
I am disappointed in some of the agents giving you opinions rather than advise about short sales. Yes they are difficult but there will continue to be short sales this year and for the foreseeable future. . Agents should understand this and learn how to do them and if they don't like them then you should find an agent who does and can assist you with the purchase if the home you like to buy is a short sale
2 votes
Annette Law…, Agent, Palm Harbor, FL
Sat Jan 11, 2014
There are NO advantages to buying a short sale.
A bank owned foreclosure is ACTUALLY for sale.
-
A short sale requires the approval of many, many, many organizations who can impose what ever they choose upon the buyer or seller and in the end the seller may just quit the process.

Or the investor may ask for an additional $100,000 (my waterfront experience) or the court appointed trustee demands a $15,000, off the HUD payment, (my Palm Harbor experience. Trustee owns a real estate company) all resulting in a year of enduring the process only to encounter a NO SALE at the end.
-
Short sales are not suitable for everyone.
Know what you are engaging in, buckle your seat belts and get ready for a wild ride.
Short sales are the "Wild, Wild, West of Real Estate where there is an illusion of rules but anything can and does happen."

Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4041
http://RealEstateMadeEZ.us
2 votes
Cathryn Brow…, Agent, Chicago, IL
Sat Jan 11, 2014
Short sales are typically an easier process than foreclosures. With my clients who have pursued foreclosures, communication has been very difficult and due to the multiple offer process that, you could wait to hear about the status of your offer for up to 4 months. Here's a helpful article regarding the same. http://www.keepingcurrentmatters.com/2013/10/23/10-hidden-ha…

Feel free to reach out with any particular questions.

CATHRYN BROWNE
Broker Associate | Baird & Warner City North
(o) 773-549-1855 | (m) 773.883.2448
cathryn.browne@bairdwarner.com
2 votes
Lucid Realty…, Agent, Addison, IL
Sat Jan 11, 2014
By foreclosure I assume you mean bank owned, since short sales are often in the foreclosure process. Short sales are a real pain the ass and I tell my buyers to expect a 5 month process. For that you should be able to get a decent discount but lately it looks like it's harder and harder to get that discount. Also, if your realtor offers buyer rebates they might be prohibited under the terms of a short sale - the arms length agreement you will be asked to sign.

A bank owned property that is is decent condition can often get full market value but he process is much simpler.

Anything that is offered at great price is going to go in a couple of days with multiple bids. It's really hard to get a "deal", though not impossible.
Web Reference:  http://lucidrealty.com
2 votes
Dirk Gould, Agent, Chicago, IL
Sat Jan 11, 2014
Actually, there are several disadvantages to buying a short sale over a foreclosure; length of time for bank approval, more uncertainty that the deal will close. But it really depends on the dynamics of each deal and who the lender(s) is.
2 votes
Evelyn S. Fr…, Agent, Chicago, IL
Tue Jul 1, 2014
There is no real advantage buying a short sale vs a foreclosure.

A foreclosure (bank owned) will close more quickly whereas a short sale can take anywhere from 60 days to 6 months+.

A short sale the seller may or may not be living there and may or may not be willing to accept a low ball offer but in the end it is up to the bank to accept/reject or counter offer your offer.

If you would like to discuss more in-depth fell free to contact me directly.

Good luck!
1 vote
Thomas Moser, Agent, East Northport, NY
Tue Jul 1, 2014
The one advantage of a short sale is that the seller has an interest in it going through so they will take care of the house. Otherwise, it is a much easier process to buy a foreclosure.
1 vote
Brian Bleers, Agent, Chicago, IL
Tue Jul 1, 2014
Short Sales and Foreclosures can be a lot more work and/or stress than a traditional sale. There is a common belief that these properties are always going to net you a huge deal but that's not always the case. I would recommend speaking to a Short Sale specialist. There are a few excellent ones in my office that I can put you in touch with. Feel free to contact me for more info.

Brian Bleers
Century 21 SGR, Inc.
(630) 414-5373
brian.bleers@century21.com
1 vote
Philip Sencer, Agent, Chicago, IL
Tue Apr 1, 2014
There is not much advantage unless the short sale has been "approved' by the lien holder. Otherwise you might need to wait 2-4 months before they decide if they want to accept your price. In the current market the odds are almost 50/50 that they will want more. I prefer foreclosures, but they are harder to find now.
1 vote
I have a reply & a question. I have found a gem of a foreclosed property for $14,000. I am waiting for my farm to sell & then plan to buy it. I took my contractor over there & he pronounced it structurally sound. My question is that I called the tax assessor & it seems there are a little over $1,000 in back taxes. They did not seem to think I am responsible for that. I am disabled & have homestead exemption. Wo what is the deal?

Dianne Vandervoort in Arkansas
Flag Sun Mar 29, 2015
There is no such thing as an "approved short sale" unless the lender approved your contract in particular.
Flag Tue Apr 1, 2014
Mike Opyd, Agent, Chicago, IL
Mon Mar 17, 2014
Foreclosures typically takes a LOT less time than a short sale is the main advantage.
1 vote
David Hanna, Agent, Chicago, IL
Sun Jan 12, 2014
We will see what happens with short sales now that the tax break/amnesty for sellers not being issued a 1099 for the forgiven loan amount is expired.
Just one more piece in a complicated puzzle, and while short sales may well continue, and be a good choice for some, the experiences being shared here clearly demonstrate in the Chicago market there are many who feel they are not the right choice.
1 vote
David Hanna, Agent, Chicago, IL
Sat Jan 11, 2014
Hi Cathy, as you can see, most of us are quite sour on the short sale process. The outcome in 2013 for short sales was usually disappointing, and many other opportunities are lost with the myriad of delays and many approvals needed.
I would also say not to pursue a short sale at this time, and seek other options. Best of luck, feel free to call or write if you'd like more detailed information.
1 vote
Matt Laricy, Agent, Chicago, IL
Sat Jan 11, 2014
Short sales take forever. They take a long time with no sure thing.

Foreclosures are great if you can find one.

Have your agent sit down with you and go over the differences.
1 vote
Carmen Rodri…, Agent, Chicago, IL
Sat Jan 11, 2014
The main advantage that I see in buying a short sale is --- short sales usually are better taken care of than foreclosures considering short sales are still owner occupied or at least have occupants vs. foreclosures which may be vacant and vandalized with significant damage. Also, on both sides the sellers and buyers need a VERY PATIENT and experienced short sale real estate agent and attorney as well who knows what they are doing as SHORT SALES are VERY TIME CONSUMING and require multiple tiers of approval. Unfortunately, even when you have the best people working on the file the banks may still reject your offer and prefer to foreclose on the poor seller even when the offer is a good one.

If you are currently not represent by an agent, I would be glad to represent you as a buyer's agent. Feel free to contact me if you are seeking real estate representation to pursue a short sale or any other transaction.
1 vote
Simoneballar…, Home Buyer, East Saint Louis, IL
Mon Jul 6, 2015
I have a home for sale .who do I contact
0 votes
Debby Buffa, Agent, Town and Country, MO
Mon May 11, 2015
Short sales and foreclosures are not always the bargain they seem. A short sale needs approval for a contract not only from the seller, who is upside down on their mortgage, but from the bank as well. this can take up to a year. Many times in a foreclosure, the home has been damaged by the previous owners because they were upset they lost the house. Most times it is an as is sale and the repairs can outweigh the purchase price.
0 votes
bengibson4113, Both Buyer And Seller, Salt Lake City, UT
Fri May 8, 2015
Cathy, great question regarding the advantages of buying a short salve vs. foreclosure. My wife and I looking at similar options. We've heard that speaking with an attorney who specializes in real estate could be very helpful. It seems like there is so much to know, it might be nice to have a professional who's experienced in this sort of thing to help you make the right decisions. http://www.iarlaw.com/short-sales
0 votes
Catherine Se…, Agent, Sarasota, FL
Thu Apr 30, 2015
Hi Cathy,

I have done many short sales and foreclosure transactions, and am glad you asked this question! Now, firstly, let me qualify that I work in a high second-home market (by the #1 beach in the US) so some of our things are a little bit different.

Nonetheless - in short hand
a) if you are looking for "value," a short sale is usually better than a foreclosure because someone is still living there and is hopefully still looking after the property. Downside to a short sale is that they can take 90 days or longer to close (don't listen when a listing says "bank approved price!" It means the bank counter-offered an earlier deal and that deal fell through. A bank approved price is good only for about 3 days, then any new contract has to start over again)
b) neither short sales nor foreclosures are necessarily your "best deal" in today's market. Look for older, non-updated homes in good condition and neighborhoods where you want to be. Those are your best deals (certainly in our market) because you will be doing the cosmetic updates and improving its value over time.
c) foreclosures are quicker closings than short sales. If buying cash, a person can typically close just as quickly as the title agency / attorney can be done.

Hope this helps!

Catherine
0 votes
Rina Hodzic, Agent, Chicago, IL
Mon Feb 23, 2015
Cathy:

Keep in mind that foreclosures are sold "as is" and are usually in run-down condition and in need of much repair. Most banks will not participate in fixing up a foreclosure.A short sale property will be in much better condition. The owner is probably still occupying the residence and has been trying to maintain some sort of standard in order to sell the house. The price of a short sale home will therefore probably be higher than a foreclosure, which can be sold by the bank at a large discount. However, this is not always the case, so check out the prices of other homes sold in the neighborhood to get a good idea about the actual market value.

Best regards,

Rina Hodzic
773-366-0859
rina@pantherprorealty.com
0 votes
Patricia Str…, Agent, Davie, FL
Tue Jan 27, 2015
I would say that if there is any advantage it is the condition on the home you'd be buying. It is usually better, owner occupied many times.The disadvantage is the time it may take, the uncertainty of the process (deal or no deal, and how energy-consumming it is (you will be faxing and faxing and faxing documents or the same document many times). The banks behave in a way as if there is little or no interest on their part and therefore the treatment/communication w you.

Now if you are up to this and have patience, contact me pls:

Patricia Strasser, Realtor Associate
NHR Corp.
305.588.6878
patriciastrasserrealty@gmail.com
0 votes
Jan & Rod Ro…, Agent, Missoula, MT
Tue Jan 27, 2015
Short sales aren't always your best deals. It can be a frustrating experience. You must have a letter of loan approval, have no contingenies on a contract, you can have the house inspected but don't expect any negotiations or repairs to be done by the seller, and short sales usually take a longer amount of time to close than a regular sale. Short sales are definitely a better deal for a seller than for a buyer.
0 votes
Scott Newman, Agent, Chicago, IL
Tue Jan 27, 2015
The advantage of buying a Short Sale over a foreclosure, is that in a Short Sale, the owner still owns the property and usually is still living at the property, and should be in better condition than a foreclosure. Foreclosed properties are usually abandoned, and have been for sometime, so they tend not to be in livable condition due to the neglect.
0 votes
Bob Brandt, Agent, Schaumburg, IL
Tue Jan 27, 2015
Cathy,
Since you asked the question a year ago, I am curious if your short sale has been approved yet?
0 votes
Research, Home Buyer, Chino Hills, CA
Tue Jan 27, 2015
Funny how no one said this: when looking on foreclosure or shortsale you should check the property history.

You m ight find that in the past 15-20 years the hose was REO, repossesed several times, that means the area is not getting any better-is that reflected in the price?
0 votes
Chad Roberts, Agent, Henderson, NV
Tue Dec 16, 2014
There are pros and cons to both. One thing that may appeal to you if a fast closing is wanted, a foreclosure property may have swift movement for a sale.

Regards,
Chad Roberts
Broker/Salesperson
Realty One Group
0 votes
Jackson Will…, Home Buyer, Provo, UT
Tue Dec 16, 2014
There are advantages and disadvantages to both options. Like most other things where you have to make a choice between two options, you should talk to a professional about it. There are more things to consider beyond just the type of sale being made. The only way to be able to accurately discuss what you should do is to talk to someone who can look at the actual properties and tell you what your options are.
http://www.parklandshomesforsale.com/get-advice/short-sales/
0 votes
cathysmith135, Home Buyer, Wilmington, DE
Tue Dec 16, 2014
That's a great question. There are a lot of advantages to purchasing a short sale home. First off, they're much cheaper. My sister purchased a short sale home a few years ago. The home was in great condition, it's just that the previous owner couldn't make the payments. http://www.parklandshomesforsale.com/get-advice/short-sales/
0 votes
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Fri Jun 27, 2014
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0 votes
Sounds like a scam to me.Read between the lines.
Flag Fri Sep 19, 2014
Anhson12543, Home Buyer, Houston, TX
Sun May 18, 2014
how to buy house for closure
0 votes
Bill J Delig…, Agent, Naperville, IL
Thu Mar 27, 2014
Greetings Cathy,

How is the short sale coming along?

They tend to take a long time to close and there is much uncertainty and silence waiting for the bank to respond to the initial offer.
0 votes
Mike Opyd, Agent, Chicago, IL
Mon Jan 13, 2014
There is to much to say in a simple post about this but to keep it simple. There is no guarantee that a short sale with ever close. National average is about 25% and were less here in Chicago. So you could end up waiting 9 months or more for no reason. With foreclosures banks want to get rid of these properties as fast as possible so they close sooner. Both are sold "as-is" so know this going in that any inspection items are on you.
0 votes
Jorge Vega, Agent, Chicago, IL
Sat Jan 11, 2014
Hello Cathy,

Short sales and foreclosures are very similar. The difference is that in a short sale the owner will have to make a petition to the bank allowing them to sell at a lower amount of what they owe. This means that the process will be longer in a short sale. Foreclosures are already owned by the bank and the the process is much faster. Good luck!
0 votes
Philip Sencer, Agent, Chicago, IL
Sat Jan 11, 2014
There is none. On a short sale it can take 2-4 months for the bank to respond as to whether or not they accept your offer. They might counter it or something else can happen. REO's are cleaner.
0 votes
JIM Michaels, Agent, Chicago, IL
Sat Jan 11, 2014
email me at jmichaels@remax.net and I will send you some valuable information on the subject
0 votes
Jack Lewitz, Agent, Lincolnwood, IL
Sat Jan 11, 2014
Short sales and foreclosures are both distressed sales. Short sales involve seller buyer and require bank approval . Foreclosure sale is between buyer and bank. Short sales can be complicated and difficult to navigate and you need someone who can negotiate the sale with the bank to get what is called a short sale approval letter. If you want to discuss more about your house you can contact me here or on my website
0 votes
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