is preforeclosure the same as a short sale?

Asked by milton, New York, NY Thu Feb 12, 2009

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15
Alan May, Agent, Evanston, IL
Wed Feb 18, 2009
Being corrected on a public forum, is a risk you take when you post on a public forum.

And posting a correction in the same thread is helpful for all who are reading the thread, so that the correct information can be read. taking it private is only valuable to the person who made the error.

Making a public correction, as long as it's polite (and in my opinion, it was) is not only acceptable, but necessary and it does not make one a bully or a cyber-stalker.

Ilanit asked a very specific question, and deserves the correct "technical" response.
3 votes
John Stimson, Agent, Oklahoma City, OK
Tue Feb 17, 2009
If that is the case the persons listing those properties need to specify that it is a potential short sale, especially if the lender has not agreed to follow through with the sale as of the listing date. Furthermore, the market doesn't matter. The words have the same definition wherever you live, a short sale and pre-foreclosure are not the same. I did not post a comment to pick a fight, only to clarify information. Please do not be offended at my comment.
3 votes
John Stimson, Agent, Oklahoma City, OK
Tue Feb 17, 2009
Short Sale is not a politically correct way of saying pre-foreclosure. Preforeclosure is the status of an account. If you are behind on payments and the lender has started the foreclosure process but it has not been completed the you are in pre-foreclosure. A Short Sale is when the lender agrees to take less than what is owed on a property as the payoff. The term was derived from instances when the lender sells the house "short" of what was owed. As an active investor and licensed Realtor it is frustrating to see other agents giving incorrect info. Education is the key to staying up to date with todays ever changing market.
3 votes
John Sacktig, Agent, New Jersey, NJ
Tue Feb 17, 2009
Mr. Stimson,

"The words have the same definition wherever you live, a short sale and pre-foreclosure are not the same"

You are 100% correct, even here in NJ.

No one can make the assumption that "Here in NJ properties being listed as "short sales" or "lendor approval required" on the MLS more often then not a person are those where seller's are either behind in payments or have begun the paperwork for the pre-foreclosure process"

I apologize to you for following up on this, as I agree with your statements... but "As an active investor and licensed Realtor it is frustrating to see other agents giving incorrect information"
2 votes
Other/Just L…, , Fleming Fitch Grant, Holly Hill, FL
Tue Feb 17, 2009
Lending Answer:

Additionally, from a lending perspective, there is a world of difference between a short sale and the sale of a home following preforeclosure. The following are Fannie Mae's most recent guidelines regarding qualifying for a new Fannie Mae backed loan after the sale of a prior property without payment in full to the mortgagee.

SHORT SALE
If a borrower's last 12 months of mortgage payment contains no 60 day lates or worse prior to a short sale payoff, the borrower may be immediately eligible for a new Fannie Mae backed loan. Fannie Mae does not penalize short sale payoffs under Fannie's definition of a short sale.

PRE-FORECLOSURE SALE
If a borrower's last 12 months of payment history show one or more 60 day lates, Fannie Mae considers this a Preforeclosure Sale. The borrower would not be eligible for a new Fannie Mae backed loan for two years.

DEED-IN-LIEU:
If a borrower enters into a Deed-in-Lieu of Foreclosure, the borrower must wait 4 years after completion before becoming eligiblefor a new Fannie Mae backed loan.

FORECLOSURE:
If a Foreclosure proceeding was initiated by a lender, the borrower would not be eligible for a new Fannie Mae backed loan for 5 years after compltion date for a foreclosure on a primary residence or 7 years for a foreclosure on a second home or investment property.

Exception: If the borrower can demonstrate that a foreclosure on a primary residence was due to extenuating circumstances (such as illness or the death of a co-borrower), Fannie may allow the borrower to qualify for a new Fannie Mae backed loan three years after completion of the foreclosure (two years for extenuating circumstances for a Deed-in-Lieu)

FHA: FHA requires a three year waiting period after completion of forelosure before qualifying for an FHA insured loan.

NOTE BENE: Fannie Mae and FHA set MINIMUM guidelines. Lenders are free to add additional restrictions on top of Fannie Mae, Freddie Mac, or FHA guidelines so long as the additional restrictions comply with ECOA, FHA, and othr fair lending laws.

In any case, it is important to involve a Realtor asearly as possible when a homeower becomes aware that continued performance of his/her mortgage may not be possible.
2 votes
John Sacktig, Agent, New Jersey, NJ
Tue Feb 17, 2009
"As an active investor and licensed Realtor it is frustrating to see other agents giving incorrect info. Education is the key to staying up to date with todays ever changing market."

Ditto.

Thanks John.
2 votes
John Sacktig, Agent, New Jersey, NJ
Tue Feb 17, 2009
A "short sale" is not a pre-foreclosure. It is not simple nor is it a politcally correct term for "pre-foreclosure"

As Anthony states below -

A pre-foreclosure is when the lender begins foreclosure proceedings against a borrower.

Also as Anthony states:

A short sale is when the lender(s) accept less than what is owed on the mortgage to satisfy the debt allowing you to sell the home for less than what is owed. The difference is normally forgiven. At times, the lender(s) will agree to a short sale only if the borrower(s) takes back a promissory note for a portion of the difference. The rest is then forgiven.

The borrower does not need to be behind on payments for some lenders to agree to a short sale.
They do need to prove financial hardship that will lead to them defaulting on the loan.

I was going to post, but Anthony said it perfectly so I just quoted him.
2 votes
John Sacktig, Agent, New Jersey, NJ
Wed Feb 18, 2009
David, Thanks for the response below.... and I apologize for reposting it.

The person that is answering with everything except "I made a mistake" and I will correct it.. Is a poor reflection upon all of us.


"Pre-foreclosure refers to the stage of the foreclosure process.
"shortsale" refers to the property being sold for less than the mortgage(s) owed. Most of the time it is in the pre-foreclosure stage but it doesn't have to be. It could just be due to a hardship, which can be proved to the lender. I am just trying to reword this for some of the people having a hard time grasping the concept that they are not the same."

The logic that this person uses to compare the use of attorneys and title companies as an example to the fact that a preforeclosure and a short sale are different is so wrong that I can not even attempt to connect what is going on in that statement.

So again.. LLanit, I apologize for this nonsense, but you need to know that a short sale and a Pre forclosure are not the same.
1 vote
David Chambe…, , Saint Petersburg, FL
Tue Feb 17, 2009
The reason people are assuming pre-foreclosure is a shortsale could be because the market is in a downward spiral in most areas, so the mortgage which goes down slow by paying off Principal and interest does not get paid off as fast as the market is declining.

A pre-foreclosure could also be sold when the market is on the way up, which wouldn't be sold "short" because the market has appreciated. It wouldn't be advertised Pre-foreclosure when the market is on the way up because the seller is trying to make money and wouldn't want to seem desperate.

Pre-foreclosure refers to the stage of the foreclosure process.

"shortsale" refers to the property being sold for less than the mortgage(s) owed. Most of the time it is in the pre-foreclosure stage but it doesn't have to be. It could just be due to a hardship, which can be proved to the lender.

I am just trying to reword this for some of the people having a hard time grasping the concept that they are not the same.

By the way these terms are only useful for people speaking english. A translation is not available at this time.
1 vote
Dave Werth, , 58102
Thu Feb 12, 2009
Each state vary's

Short Sale is a term thatt lenders will accept offers lower than mortgage amount, also being in pre-foreclosure as the owner is behind on payments. Each state law will vary
1 vote
Laura Gianno…, Agent, Manahawkin, NJ
Thu Feb 12, 2009
If a home is in preforeclosure, that means the mortgagor (bank) has started foreclosure proceddings.

It is not the same as a short sale.

In order for a preforeclosure to be considered a short sale:

it must be listed for sale, not all preforeclosures are.

the bank must have agreed to take less than is owed on the mortgage, thereby selling short.

Laura Giannotta
Keller Williams Atlantic Shore
1 vote
Walter Burns, Agent, Hoboken, NJ
Thu Feb 12, 2009
Ilanit,

Yes, a pre-foreclosure is the same as a "short-sale". All offers are subject to the seller's lender approving them.

Please let me know if you have any additional questions.

Sincerely,

Walter J. Burns
Realtor-Associate
Weichert Realtors
1 Newark St.
Hoboken, NJ 07030
201-653-8488 Ext: 230
201-694-8946 Mobile
201-653-4154 Fax
wburns@weichert.com
1 vote
thinz, Agent, Allenhurst, NJ
Fri Aug 21, 2015
NO! A short sale can be done without a home being in arrears...but with all the default cases in the past few years, lenders give all their priority to loans in arrears...But short sales can be negotiated with the lender without stopping your payments. The most important issue to address before making the decision to stop payments (if current) is to assess the credit risk for the seller...This is not considered enough and is vital to making the decision to stop paying or not.
Tom Hinz http://www.shortsaletosell.com
0 votes
Breonnabeo, Home Buyer, Summerville, SC
Fri Aug 21, 2015
Short sale – the owner is selling and does not have funds/equity to close the transaction and needs short sale approval from lender(s). Typically owes more than market value of property and may or may not be in pre-foreclosure. If the lender(s) approve they will take it short as far as the mortgage owed. http://ForeclosureIQ.com

Pre-foreclosure - Owner is greater than 90 days late on payments and lender has started foreclosure process with a notice of trustee sale. These properties are generally not readily for sale and are what you see on Realtytrac.
0 votes
Anthony Roba…, , Harrison, NJ
Thu Feb 12, 2009
A pre-foreclosure and a short sale are not the same thing.

A pre-foreclosure is when the lender begins foreclosure proceedings against a borrower.

A short sale is when the lender(s) accept less than what is owed on the mortgage to satisfy the debt allowing you to sell the home for less than what is owed. The difference is normally forgiven. At times, the lender(s) will agree to a short sale only if the borrower(s) takes back a promissory note for a portion of the difference. The rest is then forgiven.

The borrower does not need to be behind on payments for some lenders to agree to a short sale. They do need to prove financial hardship that will lead to them defaulting on the loan.

Feel free to contact me if you have any questions.

Anthony Robaina
Realtor®
EXIT Elite Realty Group
235 Harrison Ave
Harrison, NJ 07029
Tel: 973.268.4000
Cell: 908.337.5829
Email: anthony.robaina@hotmail.com
0 votes
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