Home Buying in 33431>Question Details

Zaza, Home Buyer in Boca Raton, FL

what is the difference between short sale and forclosure?

Asked by Zaza, Boca Raton, FL Tue Feb 17, 2009

Help the community by answering this question:


With a short sale the Seller is trying to sell the property for less than what is owed(many times to avoid foreclosure) and with a foreclosure the lender has already taken possesion of the property and is now the owner/seller.
1 vote Thank Flag Link Tue Feb 17, 2009
Simply put:
Short sale is still in the owners hands and is for sale to the general public.
Foreclosure is the act of the bank "repossessing" the property.
0 votes Thank Flag Link Mon Jan 30, 2012
Hi Zaza. You've received some great answers to your question already. I'll just add that if you decide to purchase a property in a short sale situation, make sure the Realtor who is the Listing Agent is experienced with the process. There are many factors that affect processing times and big variations in length of response times between lenders/investors holding the lien . The Buyer's Agent who represents you can ask the right questions on your behalf. In my office we work as a team of three people specializing in short sales.
Many bank owned properties on the other hand are priced below market value for the express purpose of attracting multiple bids in hopes of attaining the highest price possible. These properties usually go quickly, however, don't be surprised if you are out-bid by an offer that exceeds the asking price. An experienced Buyer's Agent in this case could make a difference in being the successful bidder.

Darla Schroeder, Realtor, GRI, e-PRO
Century 21 Real Estate Champions
4350 Duhme Rd
Madeira Beach, FL 33708
cell: (727) 541-3743
0 votes Thank Flag Link Wed Feb 18, 2009
Hello, Zaza,

Another factor to consider when comparing short sales & foreclosures are the time frames that it will take to get your offer negotiated and to a successful closing. Many buyers are discouraged by the unusually long time frame that it takes to get the short sale transactions to the closing table.

Of course, using highly qualified professionals for your REALTOR and your attorney is the first step in putting a successful transaction together. And, even then, a short sale may take from 60 days to up to 6 months to receive the keys to the front door. Obviously, something you need to be prepared for if that is what you are purchasing.

Foreclosures, on the other hand, can be put together in less than 30 days, in most cases, and are less unpredicable.

Best wishes!
0 votes Thank Flag Link Tue Feb 17, 2009

Essentially, the difference between a short sale and a foreclosure is a short sale is a transaction that results in the exchange of real property involvung the owner.

A foreclosure is an exchange of real property with the bank as the owner.
0 votes Thank Flag Link Tue Feb 17, 2009
Lending answer:

In terms of qualifing for a new mortgage:

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.

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.

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.

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, allowing foreclosure to proceed to final judgment is the worst situation in terms of bein eligible for a new Fannie Mae baced or FHA insured mortgage.
0 votes Thank Flag Link Tue Feb 17, 2009
Hi Zaza!

You've received excellent answers to your question as to what is the difference between a short sale and foreclosure.

There are quite a few short sales and some foreclosures in Boca and the surrounding area. If you would like to see any it would be my pleasure to show them to you. Also, quite often there are properties listed that are not short sales but are priced competitively to them.

Let me know if I can help or assist you further.


Broker Associate, GRI
Lang Realty
9858 Clint Moore Road
Boca Raton, FL 33496
0 votes Thank Flag Link Tue Feb 17, 2009
Good answer Lynn

Zaza, another point to mention is that, while both a short sale and foreclosure will damage your credit, the foreclosure will generally do more damage because of the longer, more drawn out timeframe associated with it.

Either way, lenders these days basically treat short sale and foreclosure the same when deciding whether to grant you a new mortgage. Expect it to take 2-5 years after completion before you can get approved to buy another home.

Best of luck
0 votes Thank Flag Link Tue Feb 17, 2009

Short Sale - lender approval from a property owner agrees allow the home owner sale property LESS THAN amount of mortgage. It does impact credit scores. All offers must be submitted to bank for approval of any sale offer submitted. Home owner needs have in writing if lender intends to take any action against them collect any difference paid full understanding of those terms and conditions.

FORECLOSURE other words known as REO, Bank owner property
Bank now has full possession of property
Home owner is has no longer any rights to property cant be a resident served eviction notice
Bank will sale the property
Home owner should make all attempts NOT allow this happen it will effect credit scores and report could be very difficult to lease or purchase any property in years.
Bank will need to sale home to another home buyer

Hope that assists in any question you may have

Here is a direct link for a google search short sale and foreclosures
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Tue Feb 17, 2009
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