Luxury Real Estate Broker (10 years experience)

Buyer's Agent,
Listing Agent,


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I live in CA and I'm wondering what is the main difference between a short sale and a foreclosure.


Short sale simply means selling a property with loans greater than the property value. In a short sale, the home must sell for less than the outstanding lien amount(s). With a short sale, the owner retains title and possession. In contrast, a foreclosure (REO/ bank-owned) the bank (lienholder) takes back title and possession. Think of a short sale as a "cordial agreement" between bank and homeowner (borrower) and a foreclosure as a "hostile takeover."The proposed buyer of a short sale and the actual lien holders against the property must agree upon a price they will sell for and the process must be mitigated between the listing agent and homeowner. With a short sale, there are many "cooks in the kitchen" per say, which can lead to frustration and prolonged negotiations. On the flip side, a short sale can prove to be a worthwhile investment for those who are patient. Patience and persistence are the key to any short sale transaction.If you are thinking of buying a foreclosure on the other hand, a foreclosure is much easier to negotiate and close escrow, as buyers' agents deal directly with the bank's asset manager for much quicker responses. Foreclosures are typically discounted in price with an effort by the bank to unload the property rather than incur additional carrying costs.It's a good idea to work with a CDPE (Certified Distressed Property Expert) Realtor to facilitate smooth short sale transactions and/or assist in the negotiations and disclosures when purchasing a foreclosed property in California.