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What is a Short Sale?: A Short Sale is when the proceeds from the sale of the house will not pay off the mortgage or lien holders. A short sale occurs typically when a home is in Pre Foreclosure. The seller has missed mortgage payments and the bank has or will begin foreclosure proceedings. In this case, the bank needs to approve the sale of the house because they will need to release the lien and possibly take a loss on the loan. The bank can take anywhere from a few weeks to many months to approve a short sale. There are many situations that can cause delays with the bank's approval. There can be additional liens from banks, mechanics or taxes that need to be negotiated and released prior to approval. The advantage of a short sale for a seller is that the their credit may not be as damaged as much as a foreclosure proceeding. In addition, some of the debt may be forgiven. An advantage to the buyer is that the house may still be maintained by the owner and not abandoned. Also, the sales prices of short sales tend to be lower than average market value of similar homes.
What is a Foreclosure?: A foreclosure is when a bank has taken possession of the property from the owner. The bank now owns the property. Typically, the bank will winterize (if needed) and maintain the property while they own it. You will find foreclosures on the MLS just as any other house that is listed. Sometime you can tell it is a foreclosure because it will say 'Corporate Owned' or 'Bank Owned'. A bank is always looking for a quick closing on the property and in fact will charge a fee per day if the property does not close on time. A bank will not accept a contract with a Hubbard Clause contingency. So, they will not wait for the buyer to sell his house in order to close on the foreclosure. The foreclosed properties are also sold 'as is'. Therefore, any repairs needed will be the responsibility of the buyer after it closes. The buyer is allowed to do home inspection for their own informational purposes. However, the buyer is responsible for winterizing and de winterizing the property, turning on electricity or gas and whatever else is needed to perform the home inspection.
For more information regarding a Short Sale or Foreclosure, please contact me.