Sarah Hansen, Industry Observer in Utah (None)

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Rainmaker
3,901,348
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

short sale is a deal that can be arranged before the property goes into foreclosure, at a time when both the lender and the borrower agree that this kind of sale(one that generates proceeds that are less than are owed on the property)is preferable to a default on the mortgage.

Apr 02, 2018 03:14 PM
Rainmaker
867,969
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

This is an excellent question, and a lot of consumers don't know.

A short sale situation exists when the market value of the property fails to meet or exceed the encumberances (loan balance, delinquent taxes/assessments, other costs of sale). A reasonable buyer could not or would not overpay just to clear the seller's costs.

So the seller/seller's agent approach the lender and negotiate a sale where the lender agrees to accept less than what is owed as payoff for the debt.

This can be a great solution to the problem, as the property is 'usually' less thrashed and neglected than if it was foreclosed on, the ding to the property owner's credit is 'slightly' gentler. The con to short sales is, they can take a long time and many buyers get tired of waiting . . .

A foreclosure occurs when the borrower defaults on a loan, is given a certain amount of time to catch up (depending on where the property is) and if they do not, it is sold at auction. The lender usually assigns a dollar amount to the property which equals the amount of the debt plus costs to foreclose, which is called a 'credit bid' . . . if no one bids at or above that amount, the lender gets the property back (usually a 'trustee's deed'). 

Then they get to kick out the previous owner or tenants and clean up the mess and fix stuff and hopefully recoup some of their costs via bank-owned resale.

If an investor sees the property as feasible, and outbids the bank, they may fix and flip the property or fix and rent it out.

 

Apr 02, 2018 03:40 PM
Rainmaker
514,621
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

The difference between a short sale and a foreclosure:

1.  A Short Sale is a home "still owned by the seller" but the Seller owes more on the house than they can sell it for and so with the Bank's Permission ... the Bank agrees to take less.

2.  A Foreclosure is a sale of a home that has been taken back by the Bank and is now selling as a "Bank Owned Property".

Apr 02, 2018 07:11 PM
Rainmaker
6,363,364
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

You have some studying to do.

Apr 02, 2018 03:43 PM
Rainmaker
1,836,623
Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co. Notary Services, retired Realtor

Nina Hollander gave a great answer and Alan May gave you great wisdom. I find short sales to be a major pain in the ass but I've completed several.

Apr 02, 2018 05:53 PM
Rainmaker
665,453
Peter Testa
Nationwide Homes - Danbury, CT
PETER TESTA

You've got the answer to your question.

All I will add is if anyone needs one done in Connecticut I've done over 200 short sales since the market turned in 2005. I have a perfect record of closing 100% of my short sales; regardless of complexity.  I am trusted by a variety of homeowners & agents to complete their short sales. 

Apr 02, 2018 04:49 PM
Ambassador
5,209,245
Bob Crane
Woodland Management Service / Woodland Real Estate, EXP - Stevens Point, WI
Forestland Experts! 715-204-9671

Foreclosures are generally a result of the owners not paying their mortgage and the lender liquidating the home in hopes of getting some of their money back.

Short sales are for those owners who are upside down on their mortgage and negotiated with the lender for a lower than what is owed payoff in an effort to avoid foreclosure.

Apr 02, 2018 04:14 PM
Ambassador
2,545,009
Fred Griffin Tallahassee Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

      Title (the deed) is still with the owner in a Short Sale.  In a Foreclosure, the Title to the property has passed to the mortgagee (bank or financial institution), and the property is now REO.

Apr 02, 2018 03:15 PM
Ambassador
4,089,133
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

Great answer and response from Candice A. Donofrio - I couldn't have said it better myself!

Apr 02, 2018 07:27 PM
Ambassador
3,000,249
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

They are both very long. 

You have some great answers here. 

Apr 02, 2018 04:57 PM
Rainer
187,002
Raj Taj
RE/MAX - Lake Bluff, IL
Drive By Blessings!

Even my mother knows this one.

Apr 02, 2018 04:07 PM
Rainmaker
3,953,341
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

I like the responses from Nina, Candice and Roy.

Apr 02, 2018 03:49 PM
Rainmaker
1,716,596
Anthony Acosta - ALLATLANTACONDOS.COM
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Nina Hollander has your answer.

Apr 02, 2018 03:31 PM
Rainmaker
5,570,625
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Nina Hollander and Candice A. Donofrio gave detailed answers.... 

Apr 02, 2018 03:45 PM
Rainer
307,612
J.R. Schloemer, CRS
Kentucky Select Properties - Louisville, KY

Short sale is when the owner still owns the property and can sell the property. Although, the sale may need third party (lender) approval for the sale to occur. Also the owner needs to be behind on their payments and underwater on the property because the lender is going to take a loss on the sale as well. Otherwise, the owner would just receive less equity from the sale of the property or they could come to the closing with a check to make up ther difference in the loan payoff.

Foreclose is when the lender has taken the property through legal and court action. Now having REO on their books. 

Apr 02, 2018 03:42 PM
Rainmaker
1,361,113
Ryan Huggins - Thousand Oaks, CA
https://HugginsHomes.com - Thousand Oaks, CA
Residential Real Estate and Investment Properties

Short sale: You still have title and can sell the home for less than you owe, with the bank's approval.  No impact to your credit score.

Foreclosure: You've lost the house to the bank, they've taken it back from you and will sell it.  Your credit will be dinged and you will have a foreclosure judgement against you.

Apr 02, 2018 11:00 PM
Ambassador
3,399,495
Margaret Rome Baltimore 410-530-2400
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

Candice A. Donofrio You could write a few blogs from your excellent answers here...or maybe you already have.

Lots of good information from the AR community to this question.

Apr 02, 2018 08:06 PM
Rainmaker
1,176,218
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
& Host of Postcards From Success Podcast

One destroys (foreclosure) the owners credit the other preserves it (pre-foreclosure or what you are calling a short sale).

Short Sales are better and a Realtor can still get a listing out of them.

Apr 02, 2018 05:00 PM
Rainer
303,211
Caroline Gerardo
Sun West Mortgage Corporation - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

Candice A. Donofrio and Nina Hollander  gave you great answers but there are other things to consider

Will lender 1099 the Borrower for the forgiveness of debt? ( Borrower will owe income tax on forgiveness which is not cash in pocket, but tax owed next cycle)

Short sale softer on long-term credit- only hurts for 4 years on conventional while Foreclosure 7 years on conventional (less time on FHA and VA). 

Other concerns- these transactions are stressful on the owner and any agents as worry accumulates when you approach deadlines.  Taking this listing and trying to negotiate with a behemoth bank is no simple task. 

The owner must understand the timeline, be able to pack up and go AND find the landing place - Often a heartache for the owner to make the change

Apr 02, 2018 04:48 PM
Ambassador
1,800,633
Alan May
Jameson Sotheby's International Realty - Evanston, IL
A moving experience!

About 60 days.

Apr 02, 2018 04:23 PM
Rainmaker
709,204
Richard Bazinet /MBA, CRS, ABR
West USA Realty - Scottsdale, AZ
Phoenix Scottsdale. Sellers, Buyers & Relocations

The very short answer: a short is a negotiated foreclosure sold to a specific buyer. A foreclosure is neither.

Apr 03, 2018 06:01 AM
Rainmaker
3,868,886
Richard Weeks
Dallas, TX
REALTOR®, Broker

Candice A. Donofrio provided an excellent answer.

Apr 03, 2018 05:06 AM
Rainmaker
749,259
Brenda Mayette
Miranda Real Estate Group, Inc. - Glenville, NY
Getting results w/ knowledge & know-how!

The # of advil required  (sorry... simply couldn't resist). 

Apr 03, 2018 04:35 AM
Rainmaker
563,329
Maria Sapio
Keller Williams of Central PA - Carlisle, PA
Real Estate Agent- Carlisle, PA. Mariasapio.com

Thank you Candice A. Donofrio 

Apr 03, 2018 04:21 AM
Ambassador
3,638,605
Paul S. Henderson, REALTOR®, CRS
Fathom Realty Washington LLC - Tacoma, WA
South Puget Sound Washington Agent/Broker!

I think Nina Hollander and Candice A. Donofrio have the answer..

Apr 02, 2018 10:59 PM
Ambassador
4,312,167
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Sarah Hansen - can't beat the answer from Candice A. Donofrio.

Apr 02, 2018 10:15 PM
Rainmaker
502,126
Susie Kay
Ultra Real Estate Dallas Fort Worth - Plano, TX
North Dallas Specialist

You have many good answers here.

Apr 02, 2018 06:51 PM
Rainmaker
5,361,166
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Sarah,

You have great answers from both Nina Hollander and Candice A. Donofrio . A

Apr 02, 2018 03:52 PM
Rainmaker
1,509,802
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

In both cases, you'll have to leave your home...... in both cases, you probably can not afford it any longer..... I'd say, you have  some control over a a short sale process negotiation and you work with an agent who negotiates on your behalf( hire the one who knows what she is doing!), also you can rebuild your credit sooner, vs you have no control over brutal foreclosure process by your lien holder. 

Apr 03, 2018 11:42 AM
Rainmaker
4,799,306
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Foreclosure - bank owned

Short sale - bank approved but not owned.

Apr 03, 2018 05:41 AM
Ambassador
3,986,518
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

Many short sales are not in foreclosure nor are they REO properties yet. It just could mean the seller cannot sell at a figure to payoff the debt.

Apr 02, 2018 08:14 PM
Rainmaker
2,609,744
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

To the seller who lost there is no difference neither is there to the buyers. Both come up short...

Apr 02, 2018 06:43 PM
Rainmaker
4,433,483
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Nina has answered.

Apr 02, 2018 03:52 PM
Rainmaker
806,557
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

Perfect definitions to look up and get the proper legal descriptions rather than someone's opinions.

Apr 03, 2018 12:11 PM
Rainmaker
1,707,297
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Both scew up the credit and when there was national legislation about debt foregiveness short sales were even better for the owner. It still can be best to work with the lender to avoid a full blown forclousre even with tax implications.

Apr 03, 2018 11:24 AM
Rainer
365,368
Andy Brown-Climer School of Real Estate
The Climer School of Real Estate - Orlando, FL
The Best Real Estate School in Florida

Short sale is selling and asking the bank to take less money than they are owed. Foreclosure is the bank taking the property due to non-payment of note and enforcing the mortgage lien.

Apr 03, 2018 09:23 AM
Rainmaker
3,069,684
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

Candice A. Donofrio nailed this one!

Apr 03, 2018 06:06 AM
Rainmaker
3,296,258
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

In short a foreclosure is a home taken back by the bank at foreclosure auction. A short sale is still owned by the owner who most often owes more than the home is worth. A complex process to get approval from their bank to allow the sale. 

Apr 03, 2018 05:19 AM
Rainmaker
2,013,470
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

A lot more aggravation with a SS

Apr 03, 2018 05:13 AM
Rainmaker
4,015,462
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Some great short and long explanations here, so with my typing skills I  suggest you read those!

Apr 03, 2018 05:04 AM
Rainmaker
3,985,771
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I see many explanations.

Apr 02, 2018 08:42 PM
Rainmaker
3,831,519
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Short sales can happen before it goes in foreclosures

 

Apr 06, 2018 04:53 PM
Rainmaker
4,729,727
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Short sale - owners could be living in the home, owe more than they can sell.

Foreclosure - owners have left, and the bank owns the home.

Apr 06, 2018 10:37 AM