Short sale vs foreclosure

SHORT SALE VS. FORECLOSURE

There are many advantages between and a foreclosure and short sale. You may even hear “Bank Owned” In either case, they both take time to get approved and closed.

SHORT SALE: When a seller is interested in selling their home but there will not be enough $$ from the sale to pay off their outstanding mortgage. Once the seller has an offer on their property it is presented to their bank(s) to see if they will accept a lesser amount than what is owed. The plus about this type of property is that it has been lived in and the utilities are in use. If the bank accepts your offer, you could have some immediate built in value due to the bank accepting an offer lower than the market value of the home.

However, it can take up to a year for the bank to approve, accept and close the sale. Problems that can arise even if the bank accepts, is if there are more than one loan on the property, all creditors will need to sign off on the debt.

FORECLOSURE:  This is the more risky of the two. A foreclosure can sometimes been vacant for up to a year or more. Most are in need of significant work and many of as the inspection of the bank if you are approved for an FHA loan. All are sold “as is” so if and when you have a home inspector, paid by you, there are no negotiations and/or repairs that the bank will correct or compensate for. An inspection on your part is purely for informational purposes only. In some cases the utilities are turned off to protect the property from frozen pipes, electrical issues etc. In this case, you may incur a charge to turn the utilities back on for your inspection. Most foreclosures are usually closed in about 60-75 days. The banks are much stricter on timeframe once accepted. You also are required to move quickly when signing Purchase and Sale (contract), usually within 3 business days, and it is non-negotiable. In other words, if you want an attorney to review the Purchase and Sale…NO changes or additions are accepted. Again something that needs to be accepted and signed, “as-is”.

In either case you need patience for both, most likely will need extra money to fix the property. But, if you are handy, or know people who are, this can be the ideal way to get sweat equity into your pocket. We will discuss each on a property by property basis if you decide either/both situations are for you.