The difference between Short Sales and Bank Owned Home Sales.
Many people assume these are similar sales; however these home sales are actually completely different. The Lawhead Team would like to explain the differences between these two types of property sales.
A short sale is when the homeowner owes more on the mortgage than the home is currently worth and lacks the funds to make up the difference but needs or wants to sell anyway. In this home sale, the homeowner does not necessarily need to be facing foreclosure. However, the lender (mortgagee) must agree to the loss between market value and the balance on the mortgage. In doing this, the lender agrees to release their lien to the property so that the house can be sold and title can pass to the new owner free and clear.
In a short sale, the lender does not hold the power to decide who the house must be sold to. The lender simply agrees to approve the short payoff or not. While a short sale is actually somewhat similar to a regular sale, there is an additional step in the process to acquire short sale approval.
Another home sale comparison is a bank owned home. A bank owned home, or REO, this means the property has gone all the way through the foreclosure process and is now owned by the lender. In a bank owned home sale, the lender is the seller of the property, unlike a short sale. Acting as the seller in this home sale, the lender makes all the decisions regarding terms of the sale. The difference with an REO and a regular sale is that the owner of the home is a bank, not an individual.
If you are a homebuyer looking to purchase one of these types of properties, it is important to know the difference. Make sure you ask a lot of questions to your agent when you are looking at these types of home sales.
Happy Home Shopping!