In today’s market, we see many of the homes on the market as “short sales” or “foreclosures”. What does this really mean for you, the buyer? Both usually give you a home that will end up being purchased at less than the current market value but the process is very different. Just ask someone who just spent months waiting on an answer on a short sale only to find it going into a foreclosure auction. Here are a few pros and cons of both the short sale and foreclosure.
This is usually a bank owned property. The bank will usually make current the back taxes and utilities. In some cases, these properties have been left in a hurry and sometimes left in a mess and with furnishings removed such as appliances, fixtures, bathroom mirrors, and anything else the owner thought was of value.
Once you are ready to submit your offer, your realtor will help you determine a reasonable price to offer. This is usually close to the asking price and in some cases, if a bidding war starts, it will sell for more than asking price. There is not much negotiation here. The bank will even continue to accept offers during this time. In some cases, you may have to be prequalified by the selling bank in order to even submit the offer. Once the offer has been accepted, this sale usually closes within 30-60 days. You may choose to perform an inspection and a CL100 but the banks typically will not make and repairs or concessions, the property is sold as is.
So your positives are that the process will be quicker than a short sale and you will end up purchasing a home below current market value.
A short sale home is still belongs to the homeowner. The homeowner has communicated with their bank that they will be selling their home “short” or less than what they currently owe on the property. The homeowner is usually still living in the home and the home is in good condition.
Once you are ready to submit the offer, your realtor will help you determine the price to offer. In this case, there is more negotiating power. The seller will sign off on the offer and submit it to the bank. Even though the seller signed off and “accepted” the offer, the bank will have the final say. They may come back with a counter offer. This process is usually longer than a foreclosure, lasting anywhere from 30-90 days. I’ve even seen it longer than that. Once the offer has been accepted, the closing takes place 30-45 days later. You may choose to perform an inspection and a CL100 and in some instances, the seller may choose to make the repairs but usually the home is sold “as is”.
The positives to a short sale are that you typically have more room to negotiate, are receiving a home in fine condition, and are purchasing a home below market value.