Short Sale vs Bank Owned

Real Estate Agent with Fred Real Estate Group

Today Buyers and Sellers of Central Oregon homes are hearing these terms more and more which bring more questions than answers most of the time.  There are many misunderstandings of what these terms mean and what the process is or can be.  The current real estate market is one that even veterans of 40 plus years have never seen before.  Let's explore what these mean here locally and have a glimpse of what they may mean in other areas.

The Short Sale - A seller is attempting to sell their home for less than they owe the bank.  That is the simple answer to what a short sale is.  As we tread on you will see that the answer is not all that simple.  How can the seller do this is one of the most common questions followed by how can I buy this home for less.  The seller of a short sale is usually behind at least one payment and can not keep up with the current mortgage.  The banks do not want to have to take the home (Foreclosure).  Some of the reasons are, banks are not in business to be home owners and the average cost to the bank for a foreclosure is in excess of $30,000 according to some experts.
Ashley Drake Gephart, Associate Broker, REALTOR® a good friend in Albuquerque explains in more detail what a short sale is

A short sale of a residential property is still owned by the owner, but the owner is usually behind in their payments and the price listed is short of what is needed to pay off the mortgage and closing costs. There is no guarantee that the bank will accept a short sale even if the owner offers the full list price, and the response time from a bank on an offer can take up to six months.

A Short Sale is always subject to the lender approval this process is far more complicated that it sounds.  Some homes currently listed as a short sale have a first and a second mortgage.  In these cases approval by both lenders is necessary.  Most short sales will be sold as is, with few if any warranties.  Everything about the contract depends on the bank agreeing to it.  A short sale can take weeks to months to get bank approval.

Joshua Jarvis REALTOR® in Georgia also explains short sales;

Pre-Foreclosures are also called Short Sales in some cases. Most of these will be listed as well.  Short sales can be a great deal and opportunity but do require patience and a easy living arrangement in case the deal falls through. Not all pre-foreclosures are short sales, but most will be.

The process is not as simple as it sounds.  There are specific documents the seller will need to provide sometimes multiple times, the listing agent will need to have extensive communication with multiple parties to keep the ball rolling and be familiar with the process and the specific situation.
As a buyer you can have the best agent out there and if the listing agent is un-aware of the process your offer can be a total waste of time.   Sellers if you are working with an agent and trying to short sale your home, make sure your agent knows the process.  More than one buyer can tell you that they had an offer with a short sale only to find that it went to foreclosure anyway.  Reasons for this can vary from the bank would not accept the offer to the listing agent did not ask for the sale date to be delayed while the offer was negotiated.

Complete Article of Central Oregon Bank Owned vs Short Sale

Comments (7)

Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Without a doubt, short sales can be a real handful. Additionally, if you are financing the property, you may be out the money for an appraisal or home inspection if the sale doesn't go through. Lock terms can be a problem on the loan also. Thanks for the good information Thesa.

Jan 05, 2009 09:08 AM
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Thesa....  a good explanation here.... yes, many don't know the difference.  I wish you would have included the full difference on the bank owned side of things in this post. I thought if that was the case, that this could have been a featured... just my .02.  Happy New Year

jeff belonger

Jan 05, 2009 03:25 PM
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

Thesa ... thanks for this article on explaining difference between a short sale and bank owned.  We need more information like this and education for the public and our clients and business associations, so that they can protect their own interest. Best wishes. Harrison

Jan 06, 2009 03:07 AM
Jason & Amber Gardner
Hasson Company, Realtors - Sherwood, OR
We're Committed to Your Success!

Thesa - very important information on short sales and bank owned.  You put a lot of work in this article and resourceful links.

Best of luck in 2009!

Jan 06, 2009 04:02 AM
Bob Sloop, Consultant, Indianapolis, IN
RS Mortgage Consulting - Indianapolis, IN

Thesa, this is very informational and I am sure will help many people.  It is  a different world we live in now for sure.  I wish you much success as you put together these tough sales.

Jan 18, 2009 01:08 AM
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

How timely, Thesa, I just wrote an article about this. Short sale buyers are at an extreme disadvantage if the listing agent has little experience negotiating a short sale, regardless of how great their buyer's agent may be.

Sacramento short sale agent elizabeth weintraub

Feb 27, 2009 03:19 AM
Joshua Jarvis
Virtual Properties - Atlanta Real Estate - Duluth, GA
Moving Families Forward.


Thanks for the quote there!  I'll have to share some love back to you!


May 26, 2009 06:25 AM