If you've always wondered the difference between different types of home sales, you're not alone. People in the industry love to throw around “buzz words” like foreclosure, shortsale, bank owned, etc. But if you don't know what they mean, it doesn't do you any good. Here's a quick breakdown to help you see the difference:
1) SHORT SALES: These seem to be the most common sales in today's market. In a nutshell, this is a house with a mortgage higher than what can be garnered from a sale. So lenders allow borrowers to sell their property for less than what they owe on their mortgage to avoid foreclosure. However, the lender does not base their decision to allow a short sale on the loan balance alone. Their decision is based on the current value of the home, as well as the circumstances surrounding it.
2) REGULAR SALES: These are generally people who've taken care of their homes, have equity, and can sell them at their regular value. With this type of home sale, you can usually send an offer and hear back from them within a week.
3) BANK OWNED PROPERTIES. These are homes that have already been foreclosed on. When making an offer on this type of home sale, you can also expect an answer within a week or two, much like a regular sale. Therefore, there are two great parts about banked owned properties: 1) the short response time, and 2) the great deals you can get on the price. But there are much fewer bank-owned properties than short sales. And keep in mind that it can be hard to find one in good condition.
4) FORECLOSURES: This seems to be the term everyone thinks of first when they are looking for a good deal. Technically speaking, a foreclosure takes place when the homeowner can no longer keep up with mortgage repayments on their home. The lender can then recover the amount owed on the loan by selling or taking ownership. The thing to remember with a foreclosure is that once it's bought, it's bought. In most cases, you are not allowed to inspect the house before making an offer.