Information Outline on Short Sales and Foreclosures
A short sale means the lender is accepting a discounted payoff to release an existing mortgage.
Short Sale Advantages:
1. The seller is in control of the sale, not the bank (like in a foreclosure)
2. The impact on a sellers credit is less than a foreclosure
3. Credit bureaus do not typically show 'short sale' on your credit. Bureaus will show 'late payments'
4. The sales process, once approved by the bank, is handled like a typical sale
5. As a buyer, you can sometimes purchase properties at discounted rates relative to other closed sales
Short Sale Disadvantages:
1. Sellers credit will be impacted - average impact on credit is reported to be between 50-150 FICO points
2. Sellers must typically wait 2 years before buying another home
3. Some banks will take several weeks to months to respond to offers, frustrating some buyers in the process
4. State taxation of debt relieved via a short-sale is negotiable with bank during short-sale process
It is imperative to use a skilled agent to help guide you through the purchase and/or sale aspects of a short-sale. Please contact our office for additional information on short sales.
What is a Foreclosure:
A foreclosure means the seller has defaulted on the loan and the bank will seize and sell the property to re-pay the debt. The bank will initiate a 'Notice of Default' with the homeowner and then try to sell the property at an auction (Trustee Sale). If the property is not sold at the auction, the bank then takes the property into their inventory and it becomes an REO(bank-owned) property which they will then market and sell on the public MLS (real estate multiple listing service).
1. There are no advantages to a seller in a foreclosure.
2. There are major advantages to buying foreclosures. Sales take place within 15-45 days once they are put on the MLS and are usually deeply discounted. Once properties are on the MLS, buyers can use loans to purchase properties, as opposed to an all-cash purchase at an auction.
1. The bank will repossess the home to satisfy their outstanding debt on the property.
2. The sellers credit will be impacted with a foreclosure - typical impact on credit is 200-400 FICO points
3. Sellers must wait an average of 5-7 years to purchase a new home
4. Unless exempt or filing bankruptcy, sellers will have state taxation issues with debt relieved from bank
It is very important to use our services or complete significant due diligence prior to purchasing a foreclosure.
Please contact our office at: 714-500-3332 with any follow-up questions or to obtain more details on purchasing or selling short sales and foreclosures.
What is a Short Sale?