When Buying a Home,
What’s the Difference Between a Foreclosure & a Short Sale?
Many times when I’m helping buyers this question comes up. There are some similarities but there are some significant differences.
First, the similar points with both:
- The bank is in control. They are calling the shots. You must play by their rules. For example on a foreclosure the contract is written on their national contract form not a typical AZ Residential Resale Real Estate Purchase Contract. On a short sale they will approve it when they get to it.
- Typically both are sold with an “AS IS Addendum”, meaning they won’t fix or repair things unless it is so significant they could not sell it to anybody. An example of this is the AC unit is not working.
- Possibly significant deferred maintenance costs. The seller or previous seller has not kept the property up. It might need painting, flooring, work on the AC, roof repair etc
- Bank does not care about your personal situation. Remember they are in business to make money for their stockholders with NO emotional attachment to the home.
Differences Short Sale vs Foreclosure
- Contract normal Realtor contract Bank contract- favors the bank
- Response to Offer usually 24 hrs verbal 2-4 bank days, written 1 wk
- Price Agreed to final bank approved price unknown price is locked @ contract time
- Closing time period unknown- most 3-6 months typically 35-45 days
- Deed normal Warranty Deed less favorable Special Warranty
- Future Rights normal contract rights & remedies waive many rights i.e.: to sue
So when I’m asked, “What is a better deal; a new built, traditional sale, a short sale or a foreclosure? I probably sound like an attorney when I answer, “It depends” on your unique set of circumstances.
I would be glad to help you determine which one is best for your unique set of circumstances.