what is the difference between a forclosure and a short sale?

Status: Open
Feb 08, 2016 Views1,952 Answer a Question

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Consumer
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Home Buying
About 7 years ago
Simply put the forclosure is owned by the bank the owner has no ownership anymore, any negotiation with the home is directly with the bank or the banks Realtor.
Short Sales are still owned by the owner and the owner is basically asking the bank to allow them to sell the house for less than the remaining balance on the loan. It is VERY lengthy. I have seen a short sale that was already under contract take 2years to close.
About 8 years ago
Hi Julia,

Both a short sale and a foreclosure is a property in distress. A short sale involves asking the lienholder or lienholders to accept less than the property is worth. The lienholder may consider this option when there is a shift in the market, a major change in the homeowner's circumstances, relocation or other compelling reason. As a person with lots of experience in selling foreclosures and assisting homeowner s in short sales, a foreclosure is easier to close, but may have hidden defects that the Lienholder does not necessarily have to disclose. You have to do your due diligence when considering whether or not to purchase a short sale or foreclosure. They are not for everyone.
Kelly Jackson
REMAX Southwest
281-652-6873
About 8 years ago
Julia, great question! In both scenarios the borrower has fallen behind on his debt to the lender and can no longer afford it. A great analogy here would be Short Sale is asking for a life jacket before actually drowning and accepting the damage that has already been done, while Foreclosure is being overcome by the water and drowning. Now the kicker in the short sale is that the lender has the power to choose weather to grant the borrower the "life jacket" or not. With this analogy set forth, in terms of a short sale: the borrower owes his lender a debt for a home, but is unable to pay, generally owes more than the home is currently worth, and is willing to attempt to sell before the home is simply taken away altogether. The lender can potentially lose money here (though not necessarily as much as it stands to lose from foreclosure), which is why all decisions in this process are ultimately up to the lender. The upside, is that the borrower has at least some say in his own fate, and a short sale doesn't damage his credit as much. In-fact, in some instances, depending on the terms and outcome of the short sale, a borrower may be able to purchase another home soon after this process. In terms of a foreclosure: the borrower owes his lender a debt for a home but is unable to pay and the lender has decided that the borrower is too far underwater to help and that it's now time to take back the asset that they had loaned him money for (the home) in order to attempt to sell it themselves and recover as much money as they can. This is a huge hit to a borrower's credit, because he has proven that he is a large risk to lender's money and a lender may lose big by lending to him. The article below is another great explanation of differences. If you need help in dealing with either of these processes I can help you! Contact me anytime 832-373-9755---cody@interohouston.com.
source:
http://www.investopedia.com/ask/answers/100314/whats-difference-between-short-sales-and-foreclosures.asp
About 8 years ago
I have attached a link to a Blog article about the differences between a foreclosure, short sale, and REO listing.
source:
http://houstonprimerealty.com/blog/foreclosure-short-sale-reo-listing-difference/
About 8 years ago
Julia:

In lay terms, a short sale is a deal that can be arranged before the property goes into foreclosure. Both the lender and the borrower agree that this kind of sale (one that produces money that is less than what is owed on the property) is preferable to a default on the mortgage. Whereas, a foreclosure is one that typically belongs to the bank and and is ready for sale as soon as the legal foreclosure procedure is complete. Both processes can potentially be lengthy and that is where aligning yourself with a knowledgeable Realtor could be advantageous.

If I can be of further assistance, email me at rjohnson@roxanerjohnson.com or call me 832.444.2363.

About 8 years ago
Hello Julia! Realtors are required to disclose if the home sale is a short sale or a foreclosure The foreclosure is easy enough to understand. The Bank, Lender, Taxing Authority, HOA, etc has taken over a home due to a lack of payment (typically) and the owners were asked to leave. The "Seller" is simply one of these Banks and their Realtor helping them. The sale process is similar to other transactions. The short sale is exactly the same as a foreclosure except for one big distinction. The Seller will be the people living in the home, but the holder of mortgage (Bank, Lender, etc) must approve the sale because the proceeds from the transaction are not enough to cover the loan. They are "short". If your making an offer on a short sale listing, the first item to address is whether or not the Bank has approved the short sale and willing to take less money than what is needed to pay off the loan. If the Sellers and the Bank have not worked out an agreement before the home was placed on the market for sale, be prepared to wait weeks, possibly months. Before they can give you a response to your offer, the Seller and the Bank have to work out an agreement between them that the Bank will accept less money. The Bank does not always agree to a short sale. It is a slow process. Be prepared not to get a quick response if the Sellers do not have everything lined up.
About 8 years ago
Hi Julia,

In summary, the term short sale refers to the fact that a home is being sold for less than the balance remaining on the mortgage. A foreclosure is the act of the lender seizing the home after the borrower fails to make payments.

If you'd like to discuss any situation or interest in one of these properties or if you have any further questions, please feel free to contact me.

Dayna


Dayna Sullivan, Realtor

Realty Associates
832-283-3590 Direct
1223 Antoine Drive
Houston, Texas 77055

www.har.com/daynasullivan

Referrals Appreciated!

Texas State Law requires all real estate licensees to provide the following information about brokerage services:
https://www.trec.state.tx.us/pdf/contracts/op-k.pdf

source:
www.har.com/daynasullivan\n
Disclaimer: Answers provided are just opinions and should not be accepted as advice.
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