As the spring market approaches and more buyers are out on the market, we have received a few questions about the difference between short sales and foreclosures that we want to address today.
First, the short sale process is not necessarily a clear-cut transaction. The homeowner still owns the property, but a third party needs to approve the sale. That third party is usually a lender or bank. A short sale occurs when the owner is short on what is owed on the property based on its current market value.
The lender needs to do their due diligence to make sure that the home sells for what it’s worth, which usually takes about three to eight months. Short sales are not quick sales; sometimes, short sales can take up to a year. If you are considering purchasing a short sale, then you need to be patient. Don’t look for a short sale if your lease is about to expire or you need to move soon, as you cannot count on the transaction closing in time.
On the other hand, what most people refer to as a foreclosure is actually a bank-owned property or REO property. During this transaction, you will purchase the property straight from the bank. This process is much more like a traditional sale and is a lot more streamlined than a short sale. During a foreclosure sale, liens have been cleared, the previous owners are already evicted, and you can take ownership as soon as you get your funding, which usually happens in 30 to 45 days.
In either of these transactions, you can typically get any type of mortgage that you qualify for, provided that the property doesn’t have any structural or safety issues. In that case, you may want to look at a construction loan or try to negotiate with the bank.
In summary, short sale transactions are not very streamlined and require approval from the seller’s lender. Foreclosures— a.k.a. REO or bank-owned properties—typically happen within 30 to 45 days and the process is very similar to the typical residential real estate transaction. The type of loan you can get really depends on the condition of the property.
If you have any other questions about short sales, foreclosures, or our current real estate market, just give us a call or send us an email. We would be happy to help you!