Do I Short Sale Or Foreclose

short saleForeclosure Vs Short Sale – Do You Know The Difference?

I ask this question a lot because by now (after 5 years of these kind of sales) everyone buying or selling real estate is familiar with the term “Short Sale”. In fact most buyers say they would prefer to find a foreclosure or short sale when looking to buy a home, but do they really know what they are getting into. A couple of quick definitions of each may be appropriate before we look at the answer to that question.

A foreclosure of course is a bank owned home where the bank has foreclosed on the property and owns the right to transfer the property to a new buyer. The price,terms and closing are dictated by the bank since they now hold title to the property and may dispose of it as they wish. A short sale is a home still owned by the seller/ mortgage holder (mortgagor) and is attempting to sell the home at a price that is less than what they owe the bank on the mortgage balance. They are attempting to sell the home for less than what is owed because they are what’s referred to as “underwater” on the house where the value is far less than what the mortgage balance currently is. In a short sale however, the seller does not have final say in the closing of the home: the bank does. Although title is still held by the seller and they sign off on the sales contract the bank ultimately makes the final decision on closing because they have to accept a payoff on the sellers mortgage for less than what is owed. That will remove the lien from the property in order to close out the transaction and transfer title free and clear to the buyer. This might not sound complicated, but of course it is. Short sale transactions can take months to close and in many cases they never close. Typically there is more than one lender involved and they all have to sign off on the deal.

If you think this is a viable option for you,please use an agent that has in depth knowledge and experience in this area. A short sale can be a fantastic opportunity for either a buyer or seller but without an expert agent guided you in the deal it can also be your worst nightmare. A foreclosure sale is much less complicated and typically the bank will close as soon as you are ready. More to come!

21 year veteran in Real Estate industry,owner or Real Estate investment company, specializing in residential resale, muliti family properties and single family investment properties