Foreclosure, Pre-Foreclosure, Short Sale Common Questions

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What is the difference between Foreclosure and Pre-Foreclosure?

A Foreclosure is when the lender has gone through the foreclosure process on a property. In the industry the property is "Bank Owned" or "REO". A Pre-Foreclosure is when the seller is trying to sell the property during while the Foreclosure Process has started. It may or may not be a "Short Sale".

What is a Short Sale?

A "Short Sale" is when a Seller is selling their property for less than what is owed on the mortgage and the mortgage holder must approve the sale. A Short Sale can be very bad for both the buyer and the seller. It is estimated that 10-14% of Short Sales contracts actually settles, leaving the seller in a worst position than they started and leaving the buyer out a fair amount of money. Most Real Estate Agents will not show or want to get involved in a Short Sale.

As a buyer, which type of property should I look at?

In order of priority; Seller owned, Foreclosure. I really discourage Short Sales. With Seller owned you have more negotiating power to correct nonworking items. You get the H.O.A doc's and the parties both have incentive to complete the sale. With Foreclosures, you will have to accept the property "AS-IS" . The title is good clean and marketable but sometime there is a title problem that will delay settlement. The thing to remember with Foreclosures is "what you see is what you get, as is where is". However, buying a Foreclosure often is a rewarding event. Short Sales are tough. It usually ends up on the day of settlement that the mortgage holder will not approve the deal and will try to renegotiate it. The buyer at this point has spent thousands of dollars on application fees, appraisal, home inspections, etc... The title can also be encumbered by H.O.A liens and mechanics liens. During the Foreclosure process, all these liens are wiped out. My Broker has said over 500 time "Just say NO to short sales". Just as a side note, it is also has the highest arbitration/litigation rate.

As a owner of a distressed property, what should I do?

Call me! There are other options for you that may not have such a dramatic effect on your credit.

What if I want to buy one of these properties?

Call me!! As I have said before, when gone right, it can be very rewarding. Proper preparation and understanding is going to be the key issue for that. All consultations are free.