What is the difference between a Short Sale, a Foreclosure and a Bank-Owned home?

Question: What is the difference between a Short Sale, a Foreclosure and a Bank-Owned home?

What are the risks for buyers and sellers in each phase? What is the process to buy a home in each phase?


Answer: "Short sale (real estate) – the lender allows a property to be sold for less than the amount owed on a mortgage and takes a loss. This usually occurs when the market drops and the property is worth less than what the current mortgage is. Usually facilitated by a loss mitigation department who negotiate that debt owed down to level where the property can be sold." Foreclosure is "Foreclosure is the legal process by which a mortgage lender (mortgagee), or other lien holder, obtains a termination of a mortgage borrower (mortgagor)'s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure)."   If you're a buyer, either present interesting opportunities, however, you have to be on the lookout for potential pitfalls in either case, e.g., extended closing times, extemporaneous liens, bank requirements, etc.; if you're a homeowner facing either option, the former offers some "forgiveness" of debt, although you'll have to consult with an attorney and/or an accountant on these potential "benefits" as they may impact you just the same. The best place to start is to consult with a real estate professional who's in the know.


We are considered one of the premier Short Sale Groups in the Metro Atlanta Area.  Visit our website, Metro Atlanta Home Team to speak with one of our Short Sale Experts.