Foreclosures vs. Short Sales

Everybody likes a good deal, right? Foreclosures, short sales and real estate auctions are just examples of properties that come at drastically reduced prices.

Bank foreclosure is a property that was taken over by the mortgage holder. It is “corporate owned” or “bank owned”. Not many people understand though the difference between a foreclosure and a short sale. Unlike a foreclosed property, a short sale home is still privately owned. It may be (and in most cases is) seriously behind with mortgage payments but legally, it still belongs to the person which occupies or leases it.

The reason it is being sold “short” is simple – due to drastic decrease in home values, some property owners owe more to the mortgage holder than the property is currently worth on the real estate market. The only way a short sale property can be sold is if the bank agrees to assume the difference between the amount owed and the expected proceeds of the sale.

Although banks are willing to negotiate mortgage reductions, this is a very long (2-3 months) and frustrating process. All too often, lenders come back with counter offers that are actually higher than the asking price the property was listed for. That’s a big surprise to prospective buyers who rarely expect paying more than the full price.  Tired of waiting and disappointed with banks’ inflexibility, many of prospective buyers walk away from the deal, feeling exhausted and frustrated.

There is a huge difference between the number of foreclosures and short sales that are successfully sold. Almost every bank owned property eventually finds a buyer, while over 2/3 of all short sales end up with, well - a foreclosure…

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Town & Country GMAC/Real Estate

123 S. Arlington Heights Road

Arlington Heights, Illinois

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