Foreclosures and short sales have both become very common in our current market. I will humbly attempt to define and explain the procedures for each of these.
Let's start with foreclosures. A foreclosed home is a bank owned home. Also known as an REO listing. In Southeast Michigan, these homes are typically listed with a Realtor and listed in the MLS (multiple listing service). The multiple listing service I belong to requires the listing agent to disclose bank owned homes in a searchable field, making it easy for buyers' agents to search solely for foreclosures. By the time the bank lists the house, they typically have cleared the title and it's just a matter of negotiating price and terms with a buyer, clearing any buyer contingencies, and proceeding to closing just like any privately owned home. Depending on the bank that owns the house, a buyer can expect an answer to their offer within a couple days. There are a few banks that sit on the offers for a couple weeks, but that is not the norm. And some of those banks require a pre-approval with them before they will even look at your offer. Sometimes the buyer is required to have the utilities turned on in their own name in order to perform their home inspection. But I have noticed more banks leaving the utilities on while the house is listed. The only other real differences are the bank addendums you will be required to sign - pages and pages of rear covering for the bank. And you will more than likely get a special warranty deed as opposed to a warranty deed in a normal sale.
Government owned homes (HUD, Fannie Mae, etc) are also foreclosed homes.
Buying a Foreclosure
Short sales are a different animal indeed. A short sale is when the house is offered for sale by the owner (person as opposed to a bank) who owes more than what is owed. Once an offer is accepted, the bank has to agree to reduce the mortgage payoff. Usually some of the leg work has been done before the house ever hits the market, but there's only so much that can be done prior to getting an offer. I have had answers back on short sale offers as quickly as a few days (this is VERY rare), but typically it takes 3-6 months to get an answer back on an offer, and sometimes that answer is just "no" with no counter.
If you need to get into something right away, looking at short sale listings is probably a bad idea. If you have time (and patience) you can usually get a pretty good deal on a short sale listing. It benefits the bank to take their loss now rather than wait and incur the costs of foreclosing. Short sale is also a searchable field in the multiple listing service I belong to. Short sale listings can be searched or excluded from searches.
Short Sale Blog Posts
For more information about buying a foreclosure listing or short sale listing, please don't hesitate to call or email me anytime.
Cell: (248) 736-6407