What's the Difference Between Foreclosures and Short Sales?
You've got to love reading through some of the questions and answers on Trulia! I always love to clear up the consumer's questions that seem to be so simple for us but, not so elementary for those who are not in the real estate business. Here's the short version of a recent question that I thought needed a bit of clearing up:
What is the difference in a foreclosure and a short sale and which is the best one to buy?
In response to the initial question - The difference between a foreclosure and a short sale is that a foreclosure is owned by the bank and a short sale is still owned by the homeowner of record. That homeowner is dependent upon the bank(s) approval of the sale of their property for less than what they owe on their mortgage(s). The short sale process can take awhile but, there are different schools of thought as to which is the best to purchase--short sales or foreclosures.
Consider this--Many homeowners who have lost their home to foreclosure, leave their homes angry and tend to stop maintaining or caring for their home, sometimes removing appliances and light fixtures as they are asked to leave their home, and sometimes even maliciously destroying their former homes as they leave the home. Many short sellers WANT to protect themselves from the 7-10 years of bad credit that a foreclosure can bring, therefore they do everything that they can to keep their homes maintained so that they CAN get a buyer and get out from under their mortgage with as little damage to their credit as possible.
Short sales can and often DO take longer than a standard home purchase or even a foreclosure but, the home that you buy, compared to other options (standard resale or foreclosure), can be in better condition and at a great price too.
Buying a foreclosure is easier on you and your agent but, if you have patience, a short sale can be the better investment, oftentimes requiring FAR less rehabilitation for you, as the buyer.
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