Updated over 8 years ago on . Most recent reply
Foreclosure vs Short sale
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Which one is the headache and which is the piece of cake?
If I had to choose metaphors, I would actually go with Bi-Polar vs Depression. At least with foreclosures you occasionally get some surprisingly good news mixed in with misery.
Ease of purchase: Foreclosures are easy if you know what you're doing. What you bid, you pay (plus perhaps a buyers premium and all closing costs), and you settle quickly. Short-sales are a lesson in extreme patience.
Time to close: Foreclosures are either immediate (as in payment due within 24 hours) or within a month. Short-sales could take an eternity.
Negotiating price: Foreclosures are about being the high bidder, there is no negotiation. Short-sales are all about the price, and unfortunately it doesn't matter one bit that your seller likes the price you've offered. The seller is walking with zero cash regardless of your offer. It's all about getting third party (bank, banks, other secured creditors) approval and what makes them accept certain offers is not always clear.
Obtaining financing: With foreclosures you'll either need your own cash or private money. Even hard money can be difficult in the foreclosure scenario because you aren't able to inspect the property and generate estimates for repairs... so numbers aren't verifiable. With short-sales you'll have plenty of time to obtain financing.
With foreclosure you have to assume the worst... including the possibility that you'll have to evict the prior owners or some squatters. You will occasionally have a really smooth transaction where you paid well under market and the property is in good condition.
Short-sales are a drag. Nobody wins. The seller loses a house, kills their credit, walks away with nothing. Everybody deals with endless paperwork. End result is usually a sale at market, which is hardly what an investor is looking for.
So, with all this in mind... any preference?
- Tom Gimer
