When first setting out on the journey of purchasing a home, you may come across homes that are priced significantly lower than what you have been looking at. Then you see those words out beside it, either “Foreclosure” or “Short-Sale”. What do those terms mean? We are here to help you understand the difference between them.
1. Short sale- These are the sellers who owe more than what they can sell their home for, and therefore have to negotiate with their bank to receive a lesser amount. Typically the negotiation process with the bank can take anywhere from 4-6 months to get an offer approved and the price is subject to change during this time. There is also a chance that the bank will reject the seller’s request for a short sale and foreclose on it.
2. Foreclosure- These are the homes which have been taken back by the bank, also known as REO’s (Real Estate Owned) or “bank owned”. Like the traditional sale, the bank will want to close escrow within 30 days upon accepting your offer. The banks are motivated to sell these homes quickly and will typically price them slightly below market value to get multiple offers and create a bidding war to drive the price up. Even though you may pay over the asking prices, these can still be great values!