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what to do if a short sale goes into foreclosure?

My husband and I have been in the process of buying a home that is in short sale since January. We obtained a pre approval letter from our bank and have made an offer. There was more of a 10% difference between the bank's appraisal and the BPO so a new appraisal was ordered. The appraisal came back significantly lower than the actual pay off. The short sale application had to be resubmitted to HUD and was turned down. The bank has added a few comments and resubmitted it to HUD for a last chance at approval. If it is not approved, will it go into foreclosure? and if so, how long will it take for them to put it on the market as a foreclosure? also, will we be able to have "first dibs" on it being as we have waited this long and put up with this much headache?
  • March 07 - Statesboro
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Answers (4)

Profile picture for Outer Banks N C
There are no first dibs with bank owned or short sale homes. In each case the bank is in control of the sale and the amount. They are notorious for rejecting all offers and asking for each buyer to resubmit the offers with their highest and best price. The bank can ask for this more than once too.
  • March 07
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A foreclosure and short sale are two distinct things, but short sales are not "unrelated" to foreclosures. Short sales are typically a way of avoiding a foreclosure. Banks still proceed with foreclosure actions while the agent and homeowner are attempting to get the short sale accepted, so the user3229374's question is a good one to ask, what happens if the bank forecloses before the short sale goes through. Answer: back to square one if you are a buyer.
  • March 07
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If the house is foreclosed, your contract in void, and you're back to competing with everyone else when it comes back on the market, which is not always right away.

What may be even more important to know is how likely is it to be foreclosed before the short sale can happen. I would have your buyer's agent research when the foreclosure process started, by researching when the lis pendens was filed. Your agent should be able to give you some idea of how long it takes for the property to go from LP to foreclosure. If they don't have any idea what is typical, they could pull up a few currently bank owned properties and see how long it took in those cases.

If you are approaching that timeframe, you have reason to be concerned, if not, they you're probably fine. If you don't get this house, make sure you have your agent do the research on the foreclosure timeline BEFORE submitting an offer next time.
  • March 07
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A short sale and a foreclosure are two unrelated separate processes.
  • March 07
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