What Is The Difference Between Short Sale, Bank Owned And Regular Sale In Real Estate?

Posted by Carlos German on Monday, May 31st, 2010 at 6:53pm.

Due to the turbulence in the recent economy, there are a few different types of real estate sales that one hears about frequently. When preparing to enter the real estate market, whether as a seller or a buyer, it is important to know the terms used, and the implications of each type of sale.

Short Sale Property


You often will hear the term “short sale”. A short sale is when the homeowner owes more on their mortgage than the home can sell for in today’s real estate market. There are a few ways this can happen. One way is when a homeowner takes out an equity loan (to pay off other bills) that amounts to greater than the home can sell for including closing costs.

Another way this could happen would be if the homeowner originally bought the home with what is termed an Interest Only loan, where the payments for the first few years covers only the interest, and not the principle. With negative amortization and penalty fees for pay offs, which are included in these types of loans, the homeowner ends up with owing more than the home is worth.

Generally, homeowners will opt for a short sale before starting the foreclosure process. A short sale must be approved by the seller’s lender (mortgage holder) because the lender is often agreeing to accept less than what is owed. To qualify for a short sale, the homeowner has to prove an inability to pay for the home, provide W-2’s, pay stubs, etc. to the lender. Short sale approvals can take from 3 to 6 months to be processed, so keep that in mind when pursuing a short sale property. However, once short sale approval is obtained, the buyer can close on the transaction as usual and without paying any higher closing costs.

Bank Owned Property


A Bank owned property is exactly that. The bank has completed the foreclosure process and now owns the property. When you buy, you are buying from the bank. It’s also important to note that foreclosure is a PROCESS, not a status. Before the process starts and during the process, the homeowner owns the property. If it gets carried through to completion, the lender owns the property.

There are a few things to consider when buying a bank owned home. Bank owned homes are usually sold “as is” which means that you may have purchased the home for a lower price but you may also have to invest some money in getting it “live-in ready”. Many homeowners who have had their homes foreclosed, have been having financial difficulties for some time, which means that they have not been able to put money towards maintaining the home for a while. There may be unexpected repairs needed that were not apparent in the walk through of the house.

Regular Property Sale


Regular or traditional real estate sales are when there is a homeowner who is selling the property for at least what they owe on the mortgage, including closing costs, and they are not in the process of foreclosure.

Click here for more information on short sales.

Click here for tips on buying foreclosures.

1 Response to "What Is The Difference Between Short Sale, Bank Owned And Regular Sale In Real Estate?"

Patrick - Homes Surfside wrote: I admit, I have not been on this real estate blog in a long time… however it was another joy to see it is such an important topic and ignored by so many, even professionals. I thank you to help making people more aware of possible issues.
Great stuff as usual….

Posted on Saturday, June 5th, 2010 at 7:35am.

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