Foreclosure Versus Short Sales - What's the difference for Buyers?

This is a common question that I am often asked. The simple answer is a foreclosure is a property  that title has been taken back by the lender, and is now Bank or Lender owned. The previous owner has no connection to the property. The lender now becomes the sole owner of the property and retains the sole discretion as to the offer amount they are willing to accept. There is NO EMOTION. It all comes down to the offer they have in front of them today, and if they believe they can get a better offer by waiting and incurring continuing costs in maintenance & taxes. Generally they will respond much quicker than will a short sale that can take 6-8 weeks to hear back. The other difference is in how Bank or Lender owned property is marketed. In Bank owned property, a Broker Price opinion is ordered and or an appraisal. Once those are received a sales price is established and the home is marketed at that price. If you make a full price offer you can be assured that you can actually purchase the home at the listed price.

By comparison, a short sale is a property that is delinquent and is danger of a foreclosure, however the deed has not yet been returned to the lender, and the owner is still in title. The current owner in title has made a request to the lender to take less tha what is owed in lieu of taking the home into foreclosure which can be a lengthy process taking 6 months to a year to achieve. The lender will agree in most cases to CONSIDER a short sale however will not commit to a sales price until they receive an offer and have received a Broker Price Opinion. They will in most cases not order the BPO until they receive an offer to purchase. Then while the potential buyer waits for the BPO they continue to take offers and the whole process turns into a type of silent auction where the buyers wait to hear. Often there are several offers on the property as the Listing Realtor tends to market the property at sub normal market evaluations thereby generating many offers. In the end , the best offers are tendered 1st and the rest of the potential buyers wait 6-8 weeks only to find out they did not get their offer accepted. Usually after 1-3 failed attempts, most potential buyers become discouraged at the inability to generate a home purchase and end up looking for real homes that they can actually purchase.

"Team Boise" at 43 Degrees North Real Estate,  does not recommend or encourage buyers to consider short sales as an acceptable way to purchase Primary Housing. Foreclosures are much easier to purchase and negotiate than short sales, and generally can produce better results with far less grief and confusion. We only recommend Short Sales as an option for Investors who are willing to write multiple offers over a extended period of time and pick up a few homes out of several offers. Nationwide only about 1% of Short Sale offers result in closing.

Dale Alverson is the Director of Relocation at 43 Degrees North Real Estate and is Idaho' only Certified Buyer Broker designee. Please email or call Dale direct at 208-863-3093 for answers to your Real Estate Questions and concerns about  Boise and the surrounding towns of Meridian,Eagle,Star & Kuna.