I frequently get asked to explain the difference between a short sale and a foreclosure / Real Estate Owned (REO) property. Buyers in today?s market who are cash heavy and have a flexible time frame may be in the best position to purchase one of these foreclosed properties.

A Quick Comparison: Short Sales

A short sale means that a property owner who wishes to sell owes more money on their loan than the actual market value of their property. Some characterize this seller as “distressed” but the lender and/or bank has not started the foreclosure process or taken title from the owner. Therefore, in a short sale situation:

· The homeowner still owns the property

· The owner usually occupies the home (or has tenants)

· The property will be sold “as is,” meaning there will be no property disclosures, surveys, repairs or credits for any inspection items.

· The buyer enters into a contract to purchase with the homeowner, but needs lender approval to forgive the difference between the sale price and the balance on the mortgage.

· The bank will often wait on signing off on the agreement until they receive more than one offer.

· The time frame from contract to close is generally between 3 -6 months.

Foreclosed Properties

A Foreclosed / REO property is owned by the lender, usually a bank. The lender usually hires a company to oversee the management and sale of the property.

· The bank owns the property.

· The home is usually vacant, and unfortunately, may be missing appliances, is damaged, or in need of repair.

· Utilities are generally disconnected which can make previewing the home in the evening or in cold weather difficult.

· Property usually sold “as is.” The bank does not provide any property disclosures or guarantees any information.

· Buyer enters into a contract with the bank/lender.

· Cash offers generally win out, even when other offers are more. The banks generally don?t want to risk selling to a buyer who may be unable to secure financing.

· Response time from a bank can be as quick as 30 days or as long as six months. It can vary drastically depending on which bank it is.

We would like to thank thetruthabout for sharing today?s photo via the Creative Commons License.