If you’re considering distressed properties – short sales, REO homes, foreclosures, etc. – you may be overwhelmed by the terminology and wondering the differences between these types of sales. While they all fall under the “distressed” umbrella, there are differences in each of these types of properties. Here we’ll give you a rundown of the difference between short sale and foreclosure properties.
While foreclosures can happen for a variety of reasons, it most often occurs when the homeowner has stopped paying the mortgage and a notice of default has been filed in public records. The house goes in to foreclosure and, unless the payments are brought up to date, the home will sell to the highest bidder at public auction.
A short sale, on the other hand, occurs when a homeowner is in foreclosure but before the property goes to public auction. Under a short sale, a lender must agree to accept less than the amount that is owed on the property.
Unlike a foreclosure, it’s possible you may purchase a short sale for even less because you’re not paying off the existing loan nor making up the back payments. Buyers may be able to strike a deal with the existing lender to take less than so they can avoid dealing with a foreclosure.
Depending on their situation and end goal, both foreclosures or short sale properties can prove to be a great option for buyers. If you’re interested in checking out distressed properties in the Denver-metro area, give us a call. The experienced pros at Metrowest specialize in these types of sales and would love to work with you.