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Short Sales Vs. Bank Owned Properties

I had a lot of buyers asking me about the difference between purchasing bank owned and short sales properties. Below is a quick comparison chart:

	Property Condition	Time Required (From Offer to Close Escrow)	Price
Bank Owned	Horrible to excellent condition depending on the property. Sold as-is with no repair	As soon as 10 days.	5% to 30% below market price.
Approved Short Sale	Mint to Excellent Condition. Sold as-is with no repair.	1 to 2 months.	As much as 10% lower than bank owned properties.
Non-Approved Short Sale	Mint to Excellent Condition. Sold as-is with no repair.	2 to 6 months depending on the lenders.	As much as 10% lower than bank owned properties.

Since most short sale purchase takes a long time to realize, the transaction can easily fall apart due to seller's change in financial situation or buyer finding another home.

For buyers who have the time and patient to wait for a short sale approval from the lenders, they will most likely end up with a property in excellent condition at a price 10% below bank owned properties and less buyers fighting over the same house.

Posted by Caroline Tsou on 12/14/2008 03:00 PM

Comments (7)

sellers, buyers

This post has been included in California Information Los Angeles County, CA Information Phillips Ranch, CA Information

7 Comments on Short Sales Vs. Bank Owned Properties

DEC

Thanks for the information! Very informative. I am dealing with a short sale situation right now, and so far it has been a headache, but you are right if the buyer is patient, she stands to get a good deal- we just have no idea of when it will close!!

Great information Caroline.

I'm working with a couple now who are looking at foreclosures and short sales. The difference in the condition is the biggest difference. Price, not so luch around here.

I am confused as to why there would be any difference in condition between a short sale, bank owned or any house. Sure some foreclosures are a mess but so are some houses not in foreclosure. Also on price I dont know that there is any set rule as to what price is on any of these. Its really up to the bank in both cases.

This is a good chart. thanks for sharing it with all of us

The market must be different in your area. Around here, property condition will run horrible to good for both REO and short sale properties, with bank owned usually in worse shape. Price can tend to be lower on bank owned, since they were rejected by the market when they were pre-foreclosure short sale listings.

If you look closely, most bank owned properties are missing something such as stove, dishwasher, air condition, window treatments, doors, or the whole kitchen. Since most short sale properties are still occupied by the owner, you will find most of the household appliances still attached to the house and the house in generally good condition. That's why the condition of the short sale properties are mostly better than bank owned.

The sales price of a bank owned property is determined by the bank. The sales price of a short sale property is determined mainly by the buyer and approved by the lender. Therefore, buyer of short sale property plays a vital role in determining the purchase price. An experienced short sale agent will help you negotiate the lowest possible price since they are familiar with bank's approval (bureaucratic) process. That's how you get a price lower than the bank owned ones.

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