Distressed Properties and Short Sales

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Real Estate

Distressed Properties


A short sale occurs because the amount the owner owes on the house outweighs the house’s value. If the owner has defaulted on the loan and can no longer make payments, he may wish to make a short sale to avoid foreclosure. The owner has to work with the lender, and the lender must approve the short sale, because it’s the lender who will be losing money.

Short sales are often priced lower than comparable sales, and buyers look to short sales for good deals. However, short sales can take months to close, because offers are all contingent on lender approval. For this same reason, many short sales never close at all. Short sales are favorable to borrowers because they don’t impact credit scores in the same way foreclosures do.

Foreclosures occur when owners have defaulted on the loan by missing multiple payments. The bank publishes the notice of the foreclosure auction. Five days before the auction, the owner can no longer reinstate the loan. If the house is sold to a bidder at the foreclosure auction, the bidder can have the owner evicted within 24 hours.