The Difference Between Short Sale and Foreclosed Properties

November 5, 2009

Residential

short-sale-sqI 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.
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About Nancy Gaspadarek

With over nine years in the Chicago real estate market, Nancy continues to enjoy the momentous and exciting process of helping her clients buy and sell homes. Nancy believes that the relationships & friendships that she has developed over the years are priceless. In 2007 she made the decision to partner with Catherine Brennan and the two are collectively known in the industry as The G and B Team. ?It was the best move I could have made?, Nancy says, ?Having a knowledgeable and reliable business partner to counter balance your strengths and have a shared passion to provide top notch service and expertise to all our clients is such a blessing.? Nancy graduated from Florida State University in Tallahassee, where she received a four year scholarship and was the captain of the woman’s volleyball team for four years. Nancy has lived in downtown Chicago for over 14-years in a variety of neighborhoods. Her free time is usually spent playing tennis, golf & running/biking along the lakefront. She participated in the 1998 Chicago Marathon and has competed in a number of triathlons as well. She volunteers with The Friends of Blaine School in Lakeview, as well as Umoja Student Development and loves to travel as much as possible. You can contact Nancy at 773.259.9353 or gandbteam.com

View all posts by Nancy Gaspadarek

5 Responses to “The Difference Between Short Sale and Foreclosed Properties”

  1. Tony Says:

    Nice comparison. It’s important to make the difference before doing a business in the real estate market

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