Foreclosure vs Short Sale: What’s the Difference?

If you are a buyer in today’s market it is important to understand the difference between a foreclosure property and a short sale property.  While the news has talked a lot about foreclosed properties, you don’t hear as much about short sales even though many of the homes in today’s market fall into this category. So what does this mean to you?

Foreclosure means that the bank has seized possession of the property and is eventually going to auction off the property.  A short sale is a property on which the owner is upside down (meaning their mortgage is now more than the property is worth) and the sellers have to get bank approval to sell the home.  While a foreclosure is always considered a distressed property (meaning the owner is several  months behind on their mortgage and still living in the home), a short sale may not be.  As a result of the market over the last few years, many property owners maxed out their equity and now find that they can’t make their payments.  Some people are more proactive and attempt to sell their home before they get behind on the mortgage.  If they owe more than they can sell it for, then it is considered a short sale but not a distressed property. 

Both of these offer unique challenges and opportunities to buyers.  If a property that you are interested in falls into one of these categories, be sure to read our blog article titled “Think Buying a Foreclosure or Short Sale is a Good Deal”.  

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