What's the difference between a short sale and a bank foreclosure property?

I get asked all the time, "What is the difference between a short sale and a bank foreclosure property?" Both terms are used rather loosely these days and are becoming a very common part of our daily speech in the real estate business.

Basically, a bank foreclosure property (or REO - real estate owned property) is where a foreclosure ruling has been filed and approved by the courts and the bank is now the legal owner of the property. Unlike a short sale, bank foreclosures actually are quite easy to purchase and can close rather quickly. The process is not all that different than purchasing a home from a regular home owner. Perhaps the only differences are the types of contracts required by the banks to complete the sale and almost always the homes are sold "AS IS". Normally, with any foreclosure there are addtional forms to be filled out on top or in place of our standard contract.  

A short sale is a type of pre-foreclosure property in a sense. A short sale is when the lender will accept less than the full amount you owe on your mortgage when your home or property is sold. They do this to sell the home as quickly as possible. Why would a lender do this? Believe it or not, the lender does not want to own your property, nor do they want to incur the costs associated with foreclosing on your home (legal fees, carrying costs etc.). Therefore the lender is willing to accept the short sale of your home to avoid the time and expenses pertaining to foreclosing on your home.

If you are interested in learning more about short sales and bank foreclosures, feel free to call me at any time at (228) 697-2816.