Asked by Delgis, Charlotte, NC Thu Jan 6, 2011


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Debe Maxwell, Agent, Charlotte, NC
Thu Jan 6, 2011
Delgis, In response to your initial question - the difference between a foreclosure and a short sale is that a foreclosure is owned by the bank and a short sale is still owned by the homeowner of record. That homeowner is dependent upon the bank(s) approval of the sale of their property for less than what they owe on their mortgage(s). The short sale process can take awhile but, there are different schools of thought as to which is the best to purchase--short sales or foreclosures.

Consider this--Many homeowners who have lost their home to foreclosure, leave their homes angry and tend to stop maintaining or caring for their home, removing appliances and light fixtures as they are asked to leave their home, and sometimes just maliciously destroying their former homes as they leave. Many short sellers WANT to protect themselves from the 7-10 years of bad credit that a foreclosure can bring, therefore they do everything that they can to keep their homes maintained so that they CAN get a buyer and get out from under their mortgage with as little damage to their credit as possible.

Short sales can and often DO take longer than a standard home purchase or even a foreclosure but, the home that you buy, compared to other options (standard resale or foreclosure), can be in better condition and at a great price too.

Buying a foreclosure is easier on you and your agent but, if you have patience, a short sale can be the better investment, oftentimes requiring FAR less rehabilitation for you, as the buyer.

Either way you choose, good luck!
5 votes
Jonathan Osm…, Agent, Charlotte, NC
Mon Jan 10, 2011
Technically, there is no such thing as a "foreclosure" property. Foreclosure is a legal action.

Pre-foreclosure allows you to purchase a home just prior to foreclosure. It's a traditional sale between buyer and seller. Some pre-foreclosures are short sales but not every time.

A short sale enables the seller who owes more than their home is worth to sell for market value. These sales are "AS-IS" meaning the seller will not make repairs and unfortunately, they can a bad experience for both buyer and seller if the listing or selling agent is inexperienced. If you need to purchase a home by a specific date in the next 60 days, a short sale may not be right for you. Also, most sellers stopped making repairs long before they stopped paying the mortgage so most have deferred maintenance that will need to be addressed. FHA short sales will allow the lender to pay up to 1% of your closing costs as a buyer.

Short sales aren't typically bargains since the lender allowing the owner to sell at market value...not much below.

A Bank Owned (can be referred to as a REO, foreclosure, repo) can be any property owned by a "bank". FHA bank owned properties are called HUD homes and VA owned properties are simply referred to as VA. Most need work and the lender will NOT make repairs. For the right person, these can be a good deal however the right person has spare cash to make repairs immediately and overtime, has vision to see past dirt, grime, and debris. Also, financing can be tricky as the deferred maintenance make these homes ineligible for many first-time home buyer options.

In Charlotte, Bank owned properties are on the market for less than 90 days and sell for within 90-97% of their asking price with some selling far and beyond asking. They are hot items so be prepared to give away a lot to get the house you want.

The best option: A homeowner or builder willing to sell at today's values. Many sellers have gotten "real" with their pricing and as a result, they offer a home sold at a discount, make repairs, and the properties are in better condition.
0 votes
Edgar Barajas, , Charlotte, NC
Fri Jan 7, 2011
A Short Sale takes alot longer to get done,but if you care about the people that are in forclosure losing thier home guide them into a short sale HAFAProgram it will save thier credit you'll make lots of money and sleep good at nigth. EDGAR
0 votes
Bill Carey, Agent, Charlotte, NC
Fri Jan 7, 2011
Both are opportunities to save money for YOU the buyer. My experince is that a "short sale" offers the best chance of saving boatloads of $$. Most agents prefer the foreclosure route because it is straight forward transaction dealing directly with the bank. The problem is everyone thinks the same way so you have more interested buyers and investors which can get you into a bidding war costing you money. On the other hand a "Short Sale" takes alot of work, time and effort by the real estate agent (not you) but it is the opportunity for you to save the most.

My wife and I live in a home we recently purchased as a "Short Sale" it was alot of work for me the agent. But in the end the bank reduced the amount they were owed on the loan by $325,000 we got a deal. The home did not need any repairs as most foreclosures do it was move in beautiful condition. Go with "Short Sales" be flexible with the location to get the best deal.

Thank you,
Bill Carey, Broker/Realtor
Cell 704-905-0740
Fax 866-343-5945
Bill.Carey@HendersonProperties.com l http://www.HendersonProperties.com

Henderson Properties
Charlotte's Premier Real Estate Company
0 votes
Bill Allen, Agent, Charlotte, NC
Fri Jan 7, 2011
A short sale is when the seller and bank have agreed to sell home for less than what buyer owes. There was seller docs filled out requested by bank and home is priced at a agreed price. I would not recomend buying a shortsale or foreclosure. I would recomond buying a bank owned home,( REO), less risk for you.

0 votes
The Roskelly…, Agent, Gambrills, MD
Fri Jan 7, 2011
Hi Delgis,

The differences are vast but in a nut shell, for a foreclosure the bank already owns the home and they will be the Seller for your contract. You or your agent will deal directly with them for all sale paperwork.

On a short sale the owner of the home is likely past due on their mortgage and they owe more on the home than they can sell it for. So once they receive your offer they will be submitting it to the mortgage lender or lenders to request that they allow them to sell the home for less than what is owed. There are many steps to a short sale and there is absolutely no guarantee that any offer will be approved. They can take anywhere from two weeks to 12 months to approve or disapprove during which time you are waiting with no guarantee your offer will be accepted.
0 votes
Sam Powell, , Charlotte, NC
Fri Jan 7, 2011
Hi Delgis!
There are a number responses here that are on the mark for describing foreclosed and short sale properties. The only thing I want to add is that with either, you will need to be pre-approved by a mortgage lender, assuming you are not paying cash, for your offer to be accepted. If you have not done that, you will need to do that. Both types of properties require a certain knowledge, expertise, and experience that most people do not have. If you are not familiar with purchasing these types of properties, I would strongly encourage you to solicit the help of a Real Estate Broker. I and my company work exclusively as Buyers Agent. Feel free to contact me at either sam.powell@enceesce.com or at 980-253-5812 if I can be of assistance. Good luck with your search!
0 votes
dave, Agent, Charlotte, NC
Fri Jan 7, 2011

The difference between a foreclosure and a short sale is a forclosure is already owned by the bank. The homeowner has let the home go back to the bank and the bank now ownes the home.

A short sale is where the homeowner knows they owe more than the home is worth. They cannot pay the mortgage due to a hardship. They in turn petiton the bank to let them sell the home prior to foreclosure for less than what is owed on the home. The bank agrees to it and negotiates the offers on behalf of the homeowner.

A foreclosured home should not take much longer, if nto about the same amount of time, than if you were looking to purchase a resale home form a homeowner. The process is tha same as if you were buying any other home. The only difference is that the seller is the bank.

On a short sale you submit an offer and there si nothign short about the process. The homeowner needs to send in substantial financial paperwork to the bank and the bank can take anywhere from 3 weeks to months to repsond to your offer...

The questiosn you asked on the second part of which is better for you depends on time frame. If you have a set date or time you need to be in a home for some reason then a short sale may not be the best alternative due to the unknown with the time involved in the process.

The deals can be just as good on either one of those type deals....It is just being able to find the right one fro you.....
Web Reference:  http://www.davedicecco.com
0 votes
Felicia Jord…, Agent, Libertyville, IL
Thu Jan 6, 2011
A foreclosed property is one that has gone through a foreclosure process and is owned by the bank, known as an reo, real estaed owned by the bank, while a short sale is a home in which the seller owes more on the home than the market value and the bank may agree to accept less than what it is owned. A short sale can be a long and slow process, but can sometimes save the new buyer money if they can purchase the home for less than market value.
0 votes
Robin Faison, Agent, Huntersville, NC
Thu Jan 6, 2011
The answer to that question depends on many factors. It gets a bit complicated sometimes depending upon which bank and investors hold the mortgage. In general, the bank owned "post foreclosure" house is easier to purchase. However, some short sales offer excellent opportunities to buy houses at sub-market prices. With a short sale, the funds that the seller has available are inadequate to complete the transaction and the mortgage holder has to agree to take less money than is owed. I suggest having a long visit with your favorite realtor to look at the best options for your personal situation. Happy New Year!
0 votes
Bill Ahls, Agent, Cornelius, NC
Thu Jan 6, 2011

While both a short sale and a foreclosure will typically provide you with the same day 1 equity, buying a foreclosure is normally a much easier task. A short sale can take as little as 2 months (contract to closing) but I've seen them take as long as 9 months. The difficulty with them is twofold: (1) banks are overwhlemd with them with the typical "loss mitigator" at a large bank having between 700 and 1,000 of them on their desk at any given time. (2) If the listing agent has little experience with the short sale process then that can cause substantial delays when dealing with the bank. The listing agent has to submit a short sale packet to the bank once under contract and, if the packet is incomplete or confusing, it can easily go to the bottom of a very large stack. If you do opt for a short sale, make sure that your buyer's agent interviews the listing agent and gets a clear understanding of their credentials and whether or not the process will be optimized. Call or email me if you need more details or have any specific questions.

Bill Ahls, Broker Owner
NHB Group, Inc.
0 votes
Lexie Longst…, Agent, Charlotte, NC
Thu Jan 6, 2011
Buying a foreclosure is basically like buying any home... it is just owned by a bank instead of an individual. Some are in bad shape and may have had appliances and light fixtures removed. Some may have had heating and air systems taken out. So getting a loan on these properties is probably your hardest task. Some are in great shape and don't need anything. But the foreclosures are usually sold in "as is" condition... so you have to be prepared to fix things...and have a lender that will give a loan on this type of home.

A short sale is usually anything BUT short. I can take months and months, it can take six month, you can wait and wait to hear back from the sellers bank, and then they may turn down your offer. They may counter your offer with a price that you would never have considered.... you could waste months waiting. NOW there are some agents that specialize in short sales and have a good track record at getting their sellers thru the process. But you need to have your agent ask all the important questions to the listing agent about the short sale you are trying to buy. Otherwise you will be waiting... in frustration.

I would suggest you look for a foreclosure or a normal house that is priced well. With mortgage rates going up... they could be your best option...
0 votes
Debra M. Buck, , Charlotte, NC
Thu Jan 6, 2011
Good evening, Delgis!

I will add to what Nathan said below as he provided a great response. I think in order for me to answer this question, as it pertains to you, I would really need to learn more about your personal goals and timeline. If you have the time to wait a Short Sale isn't a bad option. If you prefer more of an instant sale, then a foreclosure is attractive. Either way, these are both possible great options for Buyers to get a great deal.

If aren't working with a Buyer's Agent and would like to tell me more about what you are looking for and your time frame, please do not hesitate to contact me. I would love the opportunity to assist you!


Debra M. Buck
HM Properties
704.421.2107 Cell
Web Reference:  http://www.hmproperties.com
0 votes
Nathan Pfahl…, Agent, Brownsburg, IN
Thu Jan 6, 2011
Well.... there's not really a clear cut answer to whether a short sale is better than a foreclosure to purchase or not. But here is the difference- a short sale typically occurs when a seller has gotten behind in mortgage payments AND the market value of the property is UNDER what the mortgage amount is on the property- for instance: A property owner has a mortgage on a home for $250K, the current market is dictating that the value of the house is $175K, therefore the "short" is $75K- and must be approved by the lender. This process can be a very time consuming sale, however you can get often time get a great property at a great price- you just have to be wiling to wait things out. A foreclosure is when the bank has already taken over the property and the property is now the outright property of the bank. Negotiations happen directly with the bank and closing can happen within a few weeks to a month or so...
0 votes
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