Foreclosure Vs. Short-Sale


Foreclosure



  • You make the deal with the bank directly, no middle men.

  • It is a signed deal that is agreed upon, no more negotiating.


Short-Sale



  • You make the deal with the seller, who tries to make a deal with the bank through negotiators

  • It is a signed deal, but a deal contingent on approvals of the bank, so negotiations or denial all together are common.





    BOTH will cost you more money to purchase vs. a traditional sale

    • Attorneys fees are higher because they do extra work

    • The buyer picks up some costs traditionally associated with the sellers like survey




General fees charged to the buyer by the banks for the opportunity to purchase that property


 


More of an Explanation of a short-sale:


*Seller realizes that they cant continue to pay mortgage and they owe more than its worth


*Seller still markets property and sells it for what it is worth, not what is owed on the propertyResult: The buyer and seller have entered into a contract. Earnest Money is received, and thepropertys status in the MLS reflects that there is a contracted buyer for the property


*Seller sends contract and terms to the bank that they owe the mortgage to (this is done through a negotiator or attorney)


*Bank receives terms, and treats the seller as a case that is in line to be reviewed


        Result: The review includes a letter from the seller why they cant make payments (hardship                      letter), market analysis from listing agent showing the property couldn't sell for more, and a review of the sellers finances and an appraisal hired by the bank.


*Bank decides whether to allow the seller to sell the property short of what is owed and either forgive the rest of the amount owed, or allowing the seller to sign a note for the amount owed.


As you can tell from the steps involved, and realizing that there are multiple cases for the bank to review, and the time element of waiting for the letter, analysis, financial documents to review, etc., this is a long process. Estimates range from 3 to 9 months on average depending on the bank and the sellers situation


 


 


 


 

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