Short Sales and Foreclosures

WHAT IS THE DIFFERENCE BETWEEN A SHORT SALE AND A FORECLOSURE?

A foreclosed home is a property that the lender has already taken back because the seller has failed to make their agreed upon mortgage payments. The bank now owns the home.

A short sale is one where the seller still owns the property, but is financially distressed and not able to make the mortgage payments any longer. The home is now in a state of “Pre-Foreclosure.” The seller is negotiating with the lender to accept less on the loan than what is currently owed. The seller hopes to sell the home for an amount acceptable by the lender, avoid foreclosure, and then walk way without liabilities or owing the bank anything further.

WHAT AMOUNT WILL THE BANK TAKE ON A SHORT SALE OR A FORECLOSURE?

In a short sale, that depends on the amount of money the seller owes. The banks will send out an independent appraiser or licensed real estate broker to give a value based on current market conditions. Based on that amount, the lender will determine how much they will be willing to take to satisfy the majority of their losses. The process is similar in foreclosures.

HOW DO I MAKE AN OFFER ON A SHORT SALE OR FORECLOSURE, AND IS THE
PROCESS LONGER?

Your real estate agent (me) will write up the offer on the standard Arizona real estate resale contract, and provide recommendations on what the home should sell for, based on current market conditions. If the home is a short sale, the price will also depend on how much the seller still owes the lender. In a short sale, the offer is sent to the listing agent, who gives it first to the seller (owner) for approval. If the owner agrees, the seller’s agent will then send it onto the lender for approval. On a foreclosure, the offer is sent to the listing agent, and they communicate the offer to the lender. For both short sales and foreclosures, once the offer is accepted, the process remains almost the same as any other transaction to purchase property in Arizona. There may be some additional disclosures that the lender will require be signed by the parties. That is determined on a case by case basis and provided by the lender if needed. Because the lender is receiving offers on numerous properties, the time it may take them to respond to an offer can range from 1 day to a couple of months.

As your agent, I will get a feel for how long the lender may take by communicating with the listing agent. There is no pre-set time limit, and no guarantees on how long the process will take. There is also no guarantee on whether the lender will even accept the terms. If time permits, and the price is competitive, I usually recommend submitting an offer. A foreclosure may not take as long to get a response; however, it may take longer during the
escrow period.