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If you have any questions or need more detailed information, please feel free to contact me via phone at 301.613.7253 or fill out the form to let us know how we can help with your real estate needs.

Office Location 795 Rockville Pike,
Rockville, MD 20852
Phone: (301) 613-7253
Fax: (301) 424-9290

What is the differerence between short sales, foreclosures, and bank-owned properties?

Here is a quick tutorial of the difference in these three types of properties that are often confused:

SHORT SALE

 This is a process in which a home-owner needs to for whatever the reason sell their home, yet they owe more on the mortgage than they can sell the home for.  The sellers work out a deal with the bank to sell the home for less than what they owe.  There are many difficulties with this type of sale for a buyer.  Many times the biggest problem is that often there may be a second loan on the property and those tend to be a little more hard-nosed about agreeing to the terms of the sale because they stand to lose a lot more money.  However, the process can sometimes be longer than a usual transaction whether there is one loan or two that a seller is working with.  This is because you are introducing a third party to the process who may or may not have any emotion invested in the sale of the property.  With Short sales the seller still remains in control of the selling process and decision-making. 

FORECLOSURE

Foreclosure is more of a process rather than an end point.  The foreclosure process starts when the bank sends a notice to a homeowner that the foreclosure proceedings have begun.  Usually this means that the bank has started the process of filing with the local courts to take ownership of the home.  During foreclosure the bank does not own the home and the process could take anywhere from three weeks to over a year to complete.  Once filed with the courts, the bank must advertise for three weeks in a local papers legal notices section that a home is in foreclosure and will be auctioned off.  Often the auction occurs at the courthouse, but sometimes at the property itself.  Essentially, the home is in limbo during foreclosure as it is entering legal proceedings.  Sometimes the occupants may be allowed to stay in the home through the proceedings, but some banks/courts require the occupants to vacate.  It is all dealt with on a case by case basis. During foreclosure the seller has little or no control over selling of the home as it has become a legal matter.

BANK-OWNED/REO 

A home has ended foreclosure once the legal proceedings have given title and ownership completely back to the bank.  The bank/lender, at this point, may list the home for sale.  Usually bank-owned properties are easier to purchase because there is only one owner/bank.  If any second loans were involved in the previous transaction it was all settled in the foreclosure process by the courts or a mutually agreeable solution with the other parties involved.  The bank has full control over the selling of the home.  It is unlike traditional purchases for a buyer in that they are dealing with a corporation rather than a person.  Therefore, it is imperative that a buyer have a representative agent that is astute in dealing with the banks/lenders in order to help facilitate a smooth and time-efficient manner.

More articles:

  • Investing in real estate
  • Why be pre-approved? (Prequalification vs. Pre-approved)
  • How does the settlement process work?
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