There’s a lot of confusion about what exactly short sales and foreclosures are – and aren’t. Here’s a handy guide to the basics.
Short sales are related to homes in pre-foreclosure status. This means that the owner likely owes more than the home is currently worth, and is behind on the payments.
A short sale happens when the bank agrees to take less than what it is currently owed. Therefore the bank is short the full amount.
The “short” in short sale has nothing to do with the amount of time it will take to sell your home. Every lender is different, but on average these sales take 4-6 months to obtain approval and close.
We’ve worked with several of the major lenders – Bank of America, Wells Fargo, Suntrust, Aurora – representing sellers in these transactions. And we work with attorneys to help us negotiate with the banks and speed things along.
Thanks to that experience, we know what to expect for our buyers. And quite honestly, most of the time we don’t like for them to get involved, unless the short sale is at a certain point in the process. If you’re considering making an offer on a short sale, it’s very important that you speak to a Realtor first. (Which could, of course, be us.)
Foreclosures are homes that the bank owns; the previous owner is no longer involved. These transactions typically have a 30-45 day closing time frame. Most foreclosures are listed initially for owner-occupants to make offers; only after that are they opened up to investor bids.
Foreclosures often need cosmetic work, such as new carpet, appliances and paint. Most of the time, they will also require more extensive work: new siding, roof, windows, etc. If you’re considering buying a particular property, you’ll usually have 7-14 days to inspect the condition and make sure you are comfortable with what you’re getting into. If you’re not, you can back out of the deal without penalty.
One additional thought: Many people think foreclosures are the best deals in this market. While they can be some of the better deals out there, it isn’t always the case that they are the best. What’s better? The other area where we see buyers get the most bang for the buck is with homes that have been completely renovated by the current owners. The buyer reaps the rewards of all the costly repairs and upgrades, without having to pay for them.