Whats The Difference Is Between A Short Sale And A Foreclosure?
Many people ask us what the difference is between a short sale and a forelcosure. During the boom time in real estate the answers were much different than today. At the peak of the market, the definition of a short sale was a property that sold the day it was listed. The term foreclosure was almost a foreign term because sellers were able to sell their homes if they were having trouble making their payments and quite frankly, there were not many.
In these days and times, more than 30% of home sales are foreclosures or short sales. This all started with a drastic rise in value of real estate. An unhealthy rise in real estate values was not something we realized was happening at the time. In fact, life was good. Everyone sold and the real problem was that here was nothing to buy. And this was a real problem. Buyers were scrounging for properties and were forced to pay high prices to obtain a home; Supply and demand at work.
A short sale is the process of a seller obtaining an offer on their property and then trying to convince the bank to accept less than what is due. This is no easy process. There are benefits because some work out, but there are many variables which should be identified, and acknowledged as to whether a not a short sale is worth pursuing.
In determining what the difference is between a short sale and a foreclosure you must first understand that a short sale is a much more difficult property to obtain. The difference between a short sale and a foreclosure is like night and day when it comes to a buyer’s experience. In fact, I like to consider a short sale as a phantom sale, because nobody is sure if they will work out.
A foreclosure is a property that has already been taken over by the bank. The seller was unable to keep up with payments and simply had to relinquish the property back to the bank. Foreclosures are fairly straight-forward sales because the banks typically do not want to be “home owners”, they want to be “home loaners”.
There are of course many variables that affect each, but now that you know the difference between a short sale and a foreclosure, ask yourself the question: “Can I wait between 3 months and a year for the bank to decide to accept a short sale?”. If the answer is no, then avoid them. Now that you know the difference between a short sale and a foreclosure, ask yourself this question: “Am I ready to take on a project? Many times foreclosures are not in good condition and the banks typically will not make repairs.