Is it easier to buy a short sale or a foreclosure?

Seems it would help lots of buyers to know what they should do.
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November 30 2010 - Phoenix
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Answers (29)

Hi Laura,

In my experience, I find that foreclosures are easier to close.  In both, you get a great price but, you assume the risk that the home won't close and the deal can be pulled at anytime (even up to closing day).  With both, you have to be careful of multiple offer situations.  No matter which situation, a buyer's agent will be able to help make the process go more smoothly.

Now with foreclosures, there are only 2 parties involved to make a decision on the contract.  And, the bank has more than enough inventory to move.  So, I find they are more ready to deal.  I also find that foreclosures are generally listed at a lower price, than short sales, again because of the amount of inventory.

With short sales, you have 3 parties involved in the decision process (the seller, the bank, and the buyer).  When there are more parties involved...it increases the turn around time.  The bank and the seller have made a deal to sell the home at a lower price to prevent a possible foreclosure.  However, the bank will want to try and recoup their loss. If at anytime they feel they can get a better price, they will pull the deal.

I always tell my buyers to think of it as an investment and not to get emotionally involved.

Sincerely,
Mechelle Cranford
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January 21 2011
In my experience foreclosures are easier and faster to work with than short sales. Once the seller of a short sale accepts your offer - it then goes off to the bank and you can be waiting around for months to find out if they will approve your offer. This can be really frustrating if you are in a hurry to find a home. Foreclosures can be much faster but have their own set of issues. After accepting your offer, the bank will normally send you an entirely new addendum that you must agree to - which may or may not contradict what the original contract said! There are defintely some great deals out there with both short sales and foreclosures - however what you save on price you may pay for with risk.
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January 20 2011
What is your definition of easy? In my opinion short sales take much longer and require maximum patience from both buyer and seller, unless you have the good fortune of finding a short sale that has been already approved it is normally going to be a while!!!


Foreclosure you can normally purchase relatively quickly and tend to be listed just below most homes in the neighborhoods. 


The bigger question is what is the best deal for you? And that you will have to make the determination. Both purchase can produce a good home with value but 



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January 20 2011
What is your definition of "easy"  A short sale is listed at a price no one knows IF the bank will accept, most cases it can take 6 months to hear back.  That is not very "easy" to me.  A REO, or foreclosure is what happens to a short sale if it does not sell, only they have to spend $ to attorneys and usually by the time it is back on the market it is for sale for less.  Banks have figured it out, and usually price REO well, price to sell as is and where is.  Both require more paperwork than from a general seller but with over 15 REO purchases under my belt, for me, foreclosure are much easier and generally a better deal for the client.
Good luck out there.
Spirit Messingham
Tierra Antigua Realty
Tucson, AZ
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January 19 2011

I always hate the answer that starts with "It depends".....but....it does.

Short Sales go through several, possibly lengthy processes with the Lender.  Depending on what has been done prior to the buyer getting involved greatly impacts the ease of the sale.  Before submitting an agreement, find out what, if anything,has been done to that point and it will give you a good indiation of how long it may take and how difficult. 

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January 19 2011
Always depends on the bank, but "easy" is relative.  Bank owned (REO) homes usually close faster, but that's also dependent upon the buyer's lender.

There's no "easy" to the equation, really.
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January 19 2011
Easy really doesn't enter into either of these types of transactions, however, I believe that foreclosures in the state of Missouri are much easier and quicker.
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December 20 2010
If you are looking for easy why be in the foreclosure/short sale market at all? Looking for easy go to a new home builder pick a spec house and movein 30/45 days later.

The reson for buying in the foreclosure/short sale markets is to save BIG $$. The difference between bank owned (reo's foreclosures) and short sales is that with bank owned the bank now has a big investement (paid attorney fees, foreclosure costs, maintaining the home, taxes, hoa fees, utilities etc) and is less willing to give super discounts. The short sale most of those fees do not apply because the bank does not own the property so they will usually take a big discount without huge bank outlays.

What makes it harder to complete a short sale is the listing broker/agent is not knowledgeable or engaged in the process with the lender/loss mitigation neigotiator. Or the buyers agent is unwilling or is not knowledgeable enough to jump in and push the process for a buyer.

Short sales are work. But you can save tens of thousands if not hundreds of thousands of dollars as a buyer.

Good Luck,
Bill
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December 20 2010
Foreclosures are much easier but usually if it is a nice property there is much more competition with potential buyers.  You need to be quick and fast in my market.  The last one I worked had 10 offers on it after being on the market 10 days.

Short sales have a lot more issues and the agent needs to understand all issues and how to deal with lenders.  Each lender is different and if the lister is not knowledgable it makes the process difficult.
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December 18 2010
Buying a foreclosure or bank owned properties is much easier.
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December 13 2010
Hands down it is much easier to buy a foreclosure. But the real question is which purchase will result in a better deal.
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December 08 2010

If the buyers need a loan, then the REO property would be easier.  I have seen many buyers lose out on some great interest rates while waiting on a short sale approval.

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December 08 2010
I agree with everyone else. It is much easier and it is much faster to buy foreclosures. It is painful to watch a vacant property go unavailable for so long immediately following the auction. But, once the banks get it back on the market, they can often move at the pace of a usual sale. In a short sale, all bets are off. There's no telling if the buyer will get the property. Even if it seems like the deal is closed, there can be a mountain of liability if the short sale contract fails to address each and every key issue. Finally, the home might still get auctioned if lines get crossed within the bank, and 3 different people could be awarded the same title... Please, give me an REO property over a short sale anytime :)
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December 08 2010
Profile picture for Kim Melin
The million dollar question.  In most instances....a bank owned foreclosure is easier.  The title is free, and the property ready to transfer.  It may take a little wait for the house to come onto the market, but generally it goes very quickly when you get the offer in the right hands. 
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December 01 2010
As most have already stated, GENERALLY it is easier and faster to purchase a foreclosure (more correctly refered to as a Bank REO) than a Short Sale. This has been the case for the last several years.  There are definately exceptions.

Times are changing.  Current legal issues and perceived legal issues with the foreclosure process have added issues, delays and complications to the purchase of many REOs. And, at the same time, staffing and infrastructure have been greatly improved to allow more reasonable expectations in time-frames and approvals on Short Sales.

The skechy history and bad reputation of Short Sales makes them a good opportunity for potentially heavier discounts than REOs.  If you are on a flexible schedule and can purchase with minimal seller concessions and assistance, a Short Sale may land you a great deal.  Make sure you are working with an agent who is experienced and energetic for best results in all cases.
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December 01 2010
Much easier a foreclosure. Especially for a cash buyer.
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December 01 2010
Profile picture for foreclosuredeals
There seems to be a trend here as well (South Florida.) REOs(foreclosures) are normally much easier to obtain as the bank has already completed the foreclosure process and has decided the price point with which it will sell the house. Assuming it's early in the short sale, the banks have to agree to the short sale before anything else can happen. This is 10x harder if there is a second lien. If the bank has mortgage insurance, it gets even worse. In closing, Short sales are a very long and drawn out process. You may be able to get it for a lesser price than if it was an REO, but you will need a lot of patience to close on this deal.

Having said that, both processes seem to move much quicker if you have the means to pay cash. 
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December 01 2010
Much much easier to buy a forecloser!!!
http://www.accessphilly.com/agents/CeliaGlick
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December 01 2010
In my market, (Georgia). It's ALWAYS easier to purchase a foreclosure over a short sale.


With a foreclosure, the bank has already had time to complete necessary paper work and set a price on the home.



With a Shortsale the bank takes weeks or even months to complete the paper work of the shortsale and then they take weeks to set a price.
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December 01 2010
It depends, according to our experience, it can be on a case to case basis it means that if the property is on a short sale stats your seller will be accepting offers to take them to the lender and the highest and best will win if is an REO or bank owned there  will be more space for "insider trading" as I call this dealings between the REO agent and its pals, I presented offers on Bank Owned for my buyers several times and they ended up selling the property for less than my offer to other "misterious": party, I am not saying that all REO agents are like that but it simply happened to us. IF the property is on a ss stats if there is only one lender will be easier, if there are two or more lien holder's is better to let it go to foreclosure and that will clean the deed and will be much easier to negotiate if whats told before doesnt happen
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December 01 2010

Laura, in our Phoenix market, foreclosures are much easier for buyers to purchase and to successfully close, as I explained in my answer below.  Some answers are coming from Realtors in other states where the market may be entirely different from ours.  Hope this helps!

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November 30 2010
Well stated Aaron, I completely agree with you, short sales are becoming easier to handle than foreclosures.

Good luck to you!
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November 30 2010
A short sale under the right set of circumstances may be the easier way go.  The banks want to negotiate, so you can still get a good price.  The process has been streamlined, so it doesn't take an eternity anymore. If you can find a short sale, say with one loan to payoff on a primary residence, then I would seriously consider it as an option.

Over the past year and a half I've found it harder to buy a foreclosure, especially in South Florida. Prices are typically at rock bottom when they hit the MLS. This leads to multiple contracts and bidding wars, causing you to pay higher than the list price  Most of the time, it's not even what you offer, but who you know or if your agent properly presents your offer to the listing broker.  I've also heard that the banks are approving less foreclosure sales for the rest of the year, in order to take less losses this year.  That would make buying a foreclosure very hard indeed.

Neither one are easy but with patience & perserverance you can get a great deal either way.

Hope That Helps!

Aaron Glassman 
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November 30 2010
You have received great answers...certainly a bank owned property is easier however a short sale may have caught your eye...I would suggest using a Realtor in your area to help you find out if a property has even made it to the market yet, just because it's bank owned it does not mean that it is readily available...a Realtor in your area can research that for you and even call the bank that owns it and find out the status.
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November 30 2010
The process for buying a short sale takes a LOT longer than buying a foreclosure.  The reason being is the bank has to make sure they have all the paperwork from the seller, they have to go through offers and negotiate it like any seller.  For a foreclosure, the bank already owns the property and can quickly decide how it wants to negotiate.

In either case, you still want to allow for regular contingencies like financing, attorney review, and inspection.
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November 30 2010
Profile picture for 18franklin
how and where can I get the news for buying a short sale or foreclosure house. if i know which house is foreclosure. what should I do,
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November 30 2010
It is much easier to buy a foreclosure than a short sale.  With a foreclosure the bank owns the property, is ready to sell and in most cases will accept the list price or close to it because the bank's already had broker price opinions completed -- from both an independent agent/broker and the listing agent.  They may have also had an appraisal completed.  The time from contract to close is often the same as a traditional sale.

In a short sale, the bank must first agree to allow the homeowner to sell for less than owed.  The bank makes this decision based on the homeowner's hardship letter and financial statement.  Then the bank must approve the amount they'll settle for on the debt.  Unless the short sale is already approved by the bank, the bank may not agree to accept the property's list price.  In some cases, the bank may want significantly more to recoup losses.  They may also ask the buyer for contributions to recoup other losses/expenditures for the property.  If there are multiple loans on the property from different lenders, settlement approval is required by these subordinate lenders.  The approval and negotiation process can take many months for a short sale.  Do not expect to set a close date and meet that date, there are too many variables in the process.  A short sale takes a buyer with tenacity, patience and most of all, time.
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November 30 2010
Dear Laura:

Waaaay faster to buy a foreclosure. Usually a response from the selling bank in a few days. Not so on the short sales: weeks or months of waiting.

Regards, Jeff

Jeff Masich
Arizona Homes and Land
HomeSmart
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November 30 2010
In my opinon, its much easier to buy a foreclosure than a short sale.  Although both types of purchases have risks, the reality is, short sales tend to wreak havoc with the timing of the purchase.  I have consistently had clients wait several months just for an answer on their intial offer.  Additionally, the current owners are often times living in the home throughout the negotiation process (which can take up to 6 months in some cases.)  You never can trust those owners will take care of the home or that they won't strip the home bare of anything valuable to sell it on ebay.  Not to mention the fact that many short sale situations end up going into to foreclosure before getting an answer from the third party.  This means as a buyer, you could potentially lose all that time waiting and have nothing to show for it.  

As I mentioned, foreclosures are not without risk either but I think they are a more calculated and managable risks. 
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November 30 2010
 
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