Short Sale is the sale of a house in which the proceeds fall short
of what the owner still owes on the mortgage. Another way to say
it is that the property is worth less than what it will cost to
sell (paying off all existing liens and closing costs). This is
commonly referred to being upside down. In order for
a short sale to close, the lender must agree to accept less than
the outstanding loan balance as full payment.
Buying a property in pre-foreclosure involves approaching the borrower/owner
and offering to buy the property outright. The borrower/owner can
walk away with the equity in the property and avoid a bad mark on
his or her credit history. The buyer has time to research the title
and condition of the property and can realize discounts well below
market value. As the number of foreclosures go up and the number
of buyers and realtors pursuing pre-foreclosure goes up, this gets
to be more difficult.
to buy a pre-closure
If the loan is not reinstated by the end of the pre-foreclosure
period, potential buyers can bid on the property at a public auction.
Buyers often are required to pay in cash at the auction and may
not have much time to research the title and condition of the property
beforehand; however, a public auction often offers some of the best
bargains and avoids the unpredictability of dealing directly with
to buy via public auction
Bank-Owned (a.k.a. REO):
If the lender takes ownership of the property, either through an
agreement with the owner during pre-foreclosure or at the public
auction, the lender will usually re-sell the property to recover
the unpaid loan amount. The lender will typically clear the title
and perform needed maintenance and repair; however, the discount
for these REO homes is typically less than a pre-foreclosure or
auction property discount.
a bank-owned property