Tuesday, March 24, 2009

SHORT SALE vs. FORECLOSURE

I find that I have to explain the difference between a short sale and a foreclosure rather often. In the MLS the homes that are on the market and are short sales will have words like "subject to lender approval" in the public comments. These homes are not bank owned.

What is a short sale? It is when the bank agrees to accept less money than what is owed on the home. The sellers still own the home, but the offer is subject to the lenders approval. The home owner also has to approve the offer.

What is a foreclosure? It is a bank owned home. The owners did not pay their mortgage, and the bank went through the foreclosure process and now owns the home.

When a seller lists a home they agree to a certain price for it and put it on the MLS. In the case of a short sale, the seller has agreed to a certain price and put the home on the market. When an offer comes in, it is subject to bank approval. The "loss mitigation" department at the bank has to get a price opinion on the property and then who ever is in charge of the file has to get approval before the offer can be accepted. That means that the price you see on the MLS may not be what the bank will accept. We don't know what the bank will accept. The person who has the file usually has a few hundred other files on his or her desk, and it is just a file. Buyers can wait over 30 days for any kind of an answer. Sometimes with the short sales the home is listed for one price, but the bank has not agreed on that price. Sometimes they list it for a low price and collect offers over a period of months. Usually the buyers give up long before they have that yes or no answer, and sometimes the home is foreclosed on while we are all waiting for the answer.

With foreclosures buying them isn't always easy, but it isn't as hard as buying a short sale. A foreclosed home is already owned by the bank. Each transaction has been far more work than buying a home from an individual seller, but they frequently get worked out and go to closing.
If you have any questions about either process, give us a call for more information.

The Butler Team 918.740.1000
Tina & Mike Butler

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