I received the following email recently from a fairly indignant potential buyer:
“I would like to know how you are listing this home as not a short sell as this house is already in foreclosure and is scheduled to go up for auction in a couple weeks?”
That’s an easy answer actually. You see, the status “short sale” and the status “foreclosure” aren’t related in causality. One can occur without the other and contrary to popular belief one doesn’t cause the other. There is much misinformation out there with regard to these terms. Throw in “pre-foreclosure” and you’ve got a mess of words that are used inappropriately and interchangeably when they shouldn’t be. To see how this works let’s look at the definitions:
Short Sale:
“A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. – Wikipedia.com (because we all know that they’re the gospel truth, right? {cough, cough} But for our purpose this definition will work.)
Pre-foreclosure:
“The period between when the borrower/homeowner defaulted on mortgage payments and when foreclosure of the property takes place.” – E-how.com
Foreclosure:
“The legal process by which an owner’s right to a property is terminated, usually due to default. Typically involves a forced sale of the property at public auction, with the proceeds being applied to the mortgage debt.” – InvestorWords.com
So, in a very condensed nutshell”¦you stop making payments and you’re in pre-foreclosure, the act of the bank taking the property back is foreclosure. Foreclosure is an event that occurs and the time preceding that event is called pre-foreclosure.
Back to the question at hand”¦
If an owner stops making payments BUT has equity in the property the sale is not a short sale. It’s a traditional sale with pre-foreclosure status. If they don’t sell the house in time then they may be foreclosed upon. If they didn’t have enough equity to make the bank whole then the seller could look at a short sale. As Dean pointed out on Monday values are up and many sellers who think they’re short actually aren’t. I’ve sold a couple houses recently where the initial call was to explore the option of a short sale and when the properties hit the market we were able to eek the owners out even or with a little spending money.
Now, if the seller is still making their payments but needs to sell and doesn’t have enough equity (or cash to bring to closing) to make the bank whole they would be looking at a short sale. I’ve had several short sale sellers who have stayed current on their payments. It’s a challenging short sale to get completed but it does happen sometimes. You can check out auctions NC if you’re interested.
Got it now? A short sale doesn’t require being in pre-foreclosure and a pre-foreclosure doesn’t mean a short sale. Don’t get me wrong, short sales and pre-foreclosures are friends”¦they hang out together, have sleepovers, go to the courthouse together sometimes when things go wrong but they’re not relatives like pre-foreclosure and foreclosure are.
If you’d like to know where you stand in this crazy market or if you’re having a hard time making your payments and would like to explore your options give us a call/email/tweet/FB message”¦we’re available and ready to help!
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
First I would like to appreciate you for the valuable information sharing with us. I think the points you have discussed here contain useful and lucrative info. Thanks for making informative blog.
To the common people who are not involved in real estate business directly are little bit confused with the term ‘foreclosure’ so the post will help them to check out the fact of it. Thanks fro the explanation.
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To the common people who are not involved in real estate business directly are little bit confused with the term ‘foreclosure’ so the post will help them to check out the fact of it. Thanks fro the explanation.
http://www.homecaredirect.co.uk/
This post simply explains how short sale and foreclosure happen in the market. These points are will be more helpful to those who are eager to know the difference between these two terms in the real estate market. Very Informative!
<a href=”http://www.creditdefinition.net/what-makes-a-house-for-short-sale/”>WHAT MAKES A HOUSE FOR SHORT SALE?</a>
There are four major requirements that need to be fulfilled so that the house can qualify as a short sale.
A house is for short sale when its market value is in decline. The value of the house must be less than the amount the lander owes to the bank.
When the seller of the house is in default his house is for short sale. In this situation the seller of the house for short sale files a letter of hardship explaining the inability to pay the difference due upon sale. These difficulties can be unemployment, bankruptcy, medical issues, death, divorce, and such.
House for short sale case is when the mortgage is in default status or close to it. Even when the payments are current, in order to prevent from problems in the future a house can qualify as for short sale considering there are other factors too for potential default.
A house is for short sale when the seller of the house has no other assets. If the lender finds other assets that the seller has from the tax returns and financial statement, the lender can still grant the house for short sale, but will most definitely require the seller to pay the difference.
Nice! If you need to short sale in Arizona, check out (LINK REDACTED FOR BLATANT VIOLATION OF BLOG COMMENT POLICY. Not to mention the “professional courtesy” policy.)
@ChazCrawford Bad form Chaz. Advertising your services on another local real estate blog? Really? I’m going in now to edit out the link you left….
I thank you for taking your time sharing your thoughts and ideas to a lot. amazing ! really really I LOVED IT. .
@personal injury i agree
This was really very interesting for me. I have been following this for a long time and I really think I have learned so much!
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