The distressed home market often uses different terms for the same thing such as a foreclosure, bank owned home, or REO property. However, a short sale is something different.
A short sale, often called a pre-foreclosure, is when the lender agrees to accept less than what a borrower owes to satisfy the mortgage. Typically, the borrower has missed two or more payments, and the lender has issued a default notice and is threatening foreclosure. Sometimes these properties are still occupied but often the homeowners or tenants have been evicted.
The upside to a short sale is the lender has not yet incurred the cost of a foreclosure proceeding. Some of this savings might be passed along to a prospective buyer. The downside to a short sale is that it can be more difficult to close.
In a short sale, you are effectively dealing with two sellers – the lender and the homeowner. Both of these need to be cooperative in order to achieve a successful closing. Sometimes the homeowners have agreed to the process because it will have less of an impact on their future ability to purchase. But they are still doing what they can to save their home.
Lenders also have the reputation of dragging their feet somewhat on short sales. Short sales can be means to save even more money, but they tend to a process. Before entering into a short sale contract, it is advisable to access everyone’s commitment to moving forward on the front end.
If you have more questions about the process or you just want to talk to see if this is an avenue you would consider, please contact us.