Buying A Home...Question Martha- What is the difference between a short sale and a foreclosure?

Real Estate Agent with Long & Foster Real Estate, Inc., Annapolis MD 21403 DRE# 319853


Martha- What is the difference between a short sale and a foreclosure?

It seems my price range and must haves is producing a lot of short sales and foreclosures to see. What is the difference?

short sale? foreclosure?A Short Sale is a home where the owners owe more on the property than todays market will give them. They may need to sell and so they put it on the market at todays market value and then when they receive an offer they send it to their bank in hopes of the bank accepting at a price that is 'short' of the current mortgage amount. The process can be a long one and certainly  requires a listing agent who is familiar with working short sales, a buyer who has patience as a bank decides if this is a workable solution for them and sellers who will protect the property while the process takes place.

A foreclosure is a home where the owners no longer own the property and the bank has foreclosed on and are now the owners. Depending on the owners and the bank the condition can be anywhere from OK to deplorable. You see...many homeowners who go into foreclosure are angry over doing so and so they may take their inability to stay or work things out with their bank on the house. Appliances may be gone, carpets torn up, electrical fixtures gone or worse. Sometimes months go by between the time a homeowner moves out and a bank takes over and without electric /heat or air working floods happen, pipes break, mold takes over. On the other side of the coin are those banks who actually work on the homes they take back and fix them to some degree. So bottom line is a foreclosure can come in all kinds of conditions but the process to purchase is usally much shorter than a short sale. 

Yes it may seem your price range and must haves is producing a lot of short sales and foreclosures but just remember... when we meet to start home shopping we will go over each and every home, condition and option so that you will be able to make the best decision for you.
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About the Author Martha Brown- As a third generation Annapolitan I love to write about my experiences in and out of the real estate market. Licensed since 1992 all with Long & Foster I am a Certified Residential Specialist (CRS) and a Seller Representation Specialist (SRS) whose passion is homes in the Annapolis MD area and surrounding communities. My goal is to help my clients understand the real estate market and to then make sound real estate decisions. 


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Re-Blogged 1 time:

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  1. Ellie McIntire 03/28/2011 02:58 PM
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Craig Hatcher
Georgia Residential Realty, LLC - Atlanta, GA

Great Q & A.

Feb 08, 2011 09:32 AM #20
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Martha, love your simple and clear explanation.  Like Ellie I'd reblog is I could.  I'll have to settle for posting to my Facebook RE business page.

Feb 08, 2011 11:58 AM #21
Susan Jackson
America's Network Realty Group, Inc - Sandy Springs, GA

Martha,  This is a clear explanation for readers.  Great post

Feb 08, 2011 01:25 PM #22
Jeanne Kozak
RE/MAX In Action - Martinsburg, WV
REALTOR and Broker/Owner in WV and VA

We forget that we are in the business every day and this comes easy to us, but the general buying public does not understand, even once we explain it. Howmany times have you tols a buyer about the potential wait in a short sale contract, and the next week they call and want to know whay they have no answer...and you just know that they will never make the wait that we take for granted

Feb 08, 2011 03:29 PM #23
Barbara Hensley
RE/MAX Properties - Rockwall, TX
Homes for Sale in Rockwall County, Texas

Martha, nicely stated.  It is confusing to many consumers and they deserve a simple definition.  Good job!

Feb 09, 2011 01:45 AM #24
Jim McCormack
Nashville Short Sale Specialist - Jim McCormack - Edge Advantage Realty, LLC - 615-784-EDGE (3343) - Murfreesboro, TN
Nashville Short Sale REALTOR - Stop Foreclosure
Good post. Buyers do not seem to understand REO versus short sale and how different the process actually is.
Feb 09, 2011 02:19 AM #25
Roger Newton
Roger Newton Real Estate - North Plains, OR

It is very important that an agent educates their buyers.  And, this is good way to do for buyers.

A lot of people will call saying I want to buy a short sale or I want to buy an REO because someone told me that I can steal a house that way.

Educated clients are much easier to work to with.

Feb 09, 2011 03:03 AM #26
Dave Moeller
Redbud Realty & Associates - Edmond, OK

Great information. It is unfortunate that so many buyers have misconceptions of what they may encounter with REO's, and short sales.


Feb 09, 2011 03:55 AM #27
Bob Sweazy
Prudential A. S. de Movellan Real Estate - Lexington, KY

Simple and brief explanation. Good job.

Feb 09, 2011 03:56 AM #28
Brenda, Ron, Lee Cunningham & Tara Keator
West USA Realty - Phoenix, AZ
Realtors, Homes for Sale - Phoenix Metro

I have to explain the difference with each buyer that calls me.  Most of them don't want to wait out the short sales.  If they are pre-approved they don't take very long but the rest of them you may be in for a long wait.  They also have to realize that a number of them never get approved.

Feb 09, 2011 04:33 AM #29
Alicia Kennedy
CT Realty Staging - East Hampton, CT
Great explanation! You made it very easy to understand!
Feb 09, 2011 04:48 AM #30
Patric Santo Pietro
RE/MAX First Realty - Metuchen, NJ

Good explanation - clear and concise. It's true that a lot of buyers these days don't know the difference between the two or what they're getting themselves into wiith each one.

Feb 09, 2011 06:53 AM #31
Diana Mehnert
Coldwell Banker Harris McHaney & Faucette - Bella Vista, AR

I beleive you explained the difference very well.  Great post.

Feb 09, 2011 07:46 AM #32
Sylvie Stuart
Realty One Group Mountain Desert 928-600-2765 - Flagstaff, AZ
Home Buying, Home Selling and Investment - Flagsta

Great explanation! I get asked this all of the time! Buyers really don't know the difference, so it's great to get a mass answer out there!

Feb 09, 2011 12:34 PM #33
Cindy Keil
Cindy Keil Coaching - Omaha, NE
CEO Cindy Keil Coaching

Great explanation!

Feb 09, 2011 12:37 PM #34
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

In my eyes, another big difference between a short sale and a foreclosure is the presence of the homeowner.

If the listing agent or the buyer needs to know something about the house, the bank sure can't tell them. But if there's an owner in the picture, they can learn something like how operate the sprinkler system without hiring an expert to find out.

And, here in Idaho at least, a short sale owner supplies a property condition disclosure, while a bank does not.

Feb 09, 2011 06:08 PM #35
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Short Sale = Foreclosure in 6 to 12 months.  Ok that is the cynical answer.  Good post.

Feb 10, 2011 06:03 AM #36
Brad Hornshaw
Brad Hornshaw Realtor Lynnwood, Bothell, Everett - Lynnwood, WA
Realtor, Listing Agent, Buyers Agent, Investments
Hi Martha Great explanation. Buyers need to take heed that these properties are offered at a good price because they more often than not need a little T L C. I showed a client a couple of Condos yesterday one foreclosure one short he told me he was looking for a deal But all he did was complain about the need for paint and flooring. Both these properties were very competitively priced .........Brad
Feb 10, 2011 07:31 AM #37
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

This is a very good explanation. Foreclosures generally close much faster than short sales.

Feb 17, 2011 03:01 PM #38
Retired Notworking
Tallahassee, FL

Even though agents try to educate their buyers, many get impatient and wonder why it's taking so long. There are quite a few agents in my area who are fed up with short sales and try to discourage their buyers from going that route. Since short sales are about 21% of the market, they're missing a lot of homes.

Mar 05, 2011 11:36 PM #39
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