What is a Short Sale and What is
a Foreclosure (and what’s the Difference)?
I am frequently asked “what is a short sale?” or “what is the foreclosure process?” and so I’d like to address that up front for people.
The simple way to explain it is: a short sale is when a bank agrees to accept a selling price “short” of what is owed on the mortgage. Let’s say the home seller bought his house in 2004 for $220,000. He currently owes $200,000 on his mortgage for his house, and its current market value is more like $180,000. To avoid the many legal costs and holding time to process a foreclosure, it may be cheaper for the bank to say “Okay, we’ll take $180,000 towards your $200,000 of debt”, thus agreeing to a Short Sale. Sounds like a simple thing, right? Well, not very simple when we look at the fact that so many people have 2 or more mortgage companies that they owe money to. And everyone has to be in agreement, or no-go. Also, banks are so overwhelmed with paperwork from these abundant transactions that they are backed up for months and months. Most short sale houses listed will say right on the listing not to expect to hear back from them for thirty to ninety days at least. That means a buyer may submit an offer then must wait to hear back anything at all for three months or more.
More Homes & Real Estate
These are both far more intricate processes than listed here, but you get the overall idea. If you want more detailed information, you are welcome to email, call or text to have a conversation with me or one of my partners, depending on your special needs and what part of town you’re in.