Q: What is the difference between short sale, preforeclosure, foreclosure and how do they differ in regards to when to make offers? What exactly comes first second or third and any auctions or whatever after…how can public buy these foreclosed deals?
–Anonymous, Sleepy Hollow, NY
A: Short sale – the owner is selling and does not have funds/equity to close the transaction and needs short sale approval from lender(s). Typically owes more than market value of property and may or may not be in pre-foreclosure. If the lender(s) approve they will take it short as far as the mortgage owed.
Pre-foreclosure – Owner is greater than 90 days late on payments and lender has started foreclosure process with a notice of trustee sale. These properties are generally not readily for sale and are what you see on Realitytrac.
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Auction – the borrower did not correct the arrears of their default and the trustee is auctioning the property to the highest bidder which may be the lender.
Foreclosure – These are bank owned REO properties, the foreclosure process has completed, all notices were done, the courthouse auction took place no one purchased it and the property was return to lender.
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You can buy the property in any one of these states with caution and due diligence. Short sale and REOs are typically listed with a Realtor, have low risk for purchasing and can get a mortgage. Auctions have maximum risk, you need all cash and if you buy you get all liens, IRS liens and possibly other mortgages tied to the property. Due diligence is really needed here.
In pre-foreclosure often the owner really doesn’t want to sell and move, is in denial. You need patience and due diligence to purchase.
Kevin Sucher is a Realtor® with Prudential Northwest Properties in Portland, OR.
A: A pre-foreclosure is when a property owner has received a notice of default and foreclosure may be described as imminent.
A foreclosure is when the bank has taken action to foreclose on the property. In some states this may include judicial action. The “trustee” steps in and the property is scheduled for auction at the courthouse.
A short sale is when the property owner owes more on the mortgage than the market value of the property and is asking the bank to accept a short payoff of the loan. In a short sale, the property owner may or may not have missed mortgage payments.
Foreclosure and pre-foreclosure data can be found online through many websites that provide that kind of information.
Check your local paper for public notices that announce foreclosure auctions held at the property or the courthouse. Keep in mind that foreclosures bought at the courthouse are bought without warranty, sight-unseen and with no opportunity to view the properties beforehand.
Short sales are listed by a broker. Contact a local Realtor to assist you in finding short sales. In a short sale you may wait months to receive an answer from the bank, and the bank may end up saying no. But you will likely get the opportunity to have an inspection.
Cathy Baumbusch is a Realtor® with Re/Max Allegiance in Alexandria, VA.
A: Contacting a local Realtor is your best bet for information. Basically, a foreclosure is a home that has been foreclosed by and owned by the lender. They will eventually be listed through a listing agent but could take months to come on the market after it has foreclosed. A preforeclosure is a property in the process of foreclosure but is still legally owned by the owner. This may or may not be a short sale. A short sale is an owner selling a home that is worth less than the mortgage(s) on the home. The lender(s) may agree to take a short on the mortgage to release it for sale. Short sales can take months to close, if they do close at all.
Beverley Hourlier is a Realtor® with Hilltop Chateau Realty in San Diego, CA.
A: Foreclosure is the legal process that the bank initiates to take the property back due to non payment. It can begin once the borrower has missed three consecutive payments. The so called foreclosure is done once the lender auctions the property at a Trustee or Sheriff Sale depending on the State law.
The pre-foreclosure process is when the lender has filed a Notice of Default and that period lasts typically three months in which the borrower must do something to cure the delinquency (payment arrangements, modification, short sale or deed in lieu) or the home will be auctioned. The pre-foreclosure period can take much longer than three months depending on the type of workout with the bank or how fast the bank is to execute the foreclosure.
A short sale is when the lender(s) agree to take less than what is owed on the loan. The realtors goal is to negotiate with all lien holders such that they not only accept to take less, but they settle the debt and release the borrower from any further liability once the short sale is closed.
An REO is a Real Estate Owned Property AKA Bank Owned. For many investors this is the way to go. This is when the bank has attempted to sell the home at auction and it reverted back to the bank. In this case your Realtor is dealing directly with the bank’s Realtor rather than in a short sale your Realtor would be working with the seller’s agent and the seller’s agent is then dealing with the bank.
You can buy foreclosure lists on realtytrac.com or you can buy late payment mortgage leads at blackbookdata.com. Either way you are going to need a savvy Realtor.
Feel free to send me an email if you would like a referral in your area.
Paola Martinsen is a Realtor® with Equity Real Estate – Premiere Elite Branch in Murray, UT.
A: A short sale happens when a property is sold for less than what is owed on that property. The investor who owns the loan on the property is asked to release their lien, allow the sale, and absorb the loss. The property is not necessarily in pre-foreclosure or foreclosure. Some short sale transactions are completed when the seller has not missed a payment.. No missed payments…no pre-foreclosure or foreclosure actions taken.
Pre-foreclosure means the seller has missed at least one payment and the bank is preparing to foreclose. A home in pre-foreclosure may or may not be a short sale. If a homeowner is behind on their payments, and the home has eqiuty, it can be sold as a home in pre-foreclosure but it is not a short sale because the proceeds will cover the liens on the property. There are times when a home in pre-foreclosure is referred to as a home in foreclosure.
Foreclosure means the investor who owns the loan(s) on a property has taken back the property for lack of payment. It is a process. In California, foreclosures are sometimes sold to a third party on the court house steps, listed with another Realtor, or sold in an online auction. A home that has gone through the foreclosure process and taken back by the bank is referred to as an REO.
If you are interested in buying a foreclosure I would recommend that you find a qualified Realtor and ask them to find foreclosures for you. You can google “how to by a forecaster in your state” and find all kinds of information on what you need to do. Good luck.
Tracey Martin is a Realtor® with Realty World Premier Associates in Salinas, CA.
Good luck!
Looking for a short sale or foreclosure property