What is the difference between a short sale and a foreclosure? Do you know?
In a nutshell, a short sale involves an owner who may be about ready to lose his house through foreclosure. He works out a debt settlement agreement with his lender, ie repaying 90% of the debt in lieu of foreclosure AND in lieu of the owner repaying 100% of the balance owed. Foreclosure is the name of the process in which the bank "reposesses" your house when you have defaulted on your mortgage. After your house has been foreclosed upon, it is considered an REO property - real estate owned by the bank.
When you are searching for a property to purchase, you can often expect some great delays when submitting an offer on a short sale. This is often caused when there is more than one lein on a property: a mortgage is a lein or debt against the house. Leins are satisfied in turn, meaning, the sale of a house pays the first trust then the second then the third and so on - this is why the entire purchase of a short sale can be such a lengthy process... with a property owner and perhaps multiple banks involved, agreeing on a contract offer can take a while!!
A foreclosure is usually a faster process since there is one entity involved with making a contract offer decision: the bank.
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