Short Sales-vs-Bank Foreclosure

As a Santa Cruz Real Estate Agent, I have had the opportunity to represent home buyers and home sellers in both Short Sales and Foreclosures (REO's). There always seems to be the question which is better for the home owner of the distressed property, and which is better the home buyer of that property.

There are upsides for a home buyer in both situations, however in my mind, at this point in time it is ALWAYS easier, faster and more cut and dry for a home buyer to purchase a bank foreclosure than a short sale. Generally you know exactly what you are buying, when the escrow is going to close and who will pay for what right out of the gate with a foreclosure. In a short sale, nothing is set in stone until the offer is accepted by the lien holder, and that often can take up to 4 months of waiting. Once the lien holder agrees to a short sale it is very possible that the terms and conditions of the offer could change based on what the lien holder is willing to accept and approve.

From the home sellers point of view, always pick a short sale (after talking with a CPA). The sellers credit recovery is much quicker than with a foreclosure. The seller is able to stay in the property during the process, which allows them a sense of control. Foreclosures work for some. Home sellers often like the feeling of walking away and letting the lien holder "deal with it". A short sale is also better for the community as a whole, home sale prices are often higher in a short sale, helping to retain property values, homes are often in better condition, and continue to be maintained during the transaction.

The bottom line is neither is an ideal situation for home buyers or home sellers, but real estate professionals are better trained and educated to deal with both transactions. Please feel free to contact me if you are in the need of a astute CPA, interested in IRS information on Foreclosures or Short Sales, or just need more detailed information.