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What are Foreclosures and Short Sales?

Foreclosures and short sales have become a significant part of the real estate marketplace in Charlotte NC and surrounding areas.  Understanding the difference between a short sale and a foreclosure is important for both buyers and sellers.

  • A foreclosure is defined as the legal process by which a lender reclaims a property when the homeowner has been unable to make the payments.  It is important to understand that lists of foreclosures on the internet may include properties where a notice of foreclosure has been filed but the process may not be complete.  A property listed as a foreclosure in the Carolina Multiple Listing Service as a "foreclosure" is a property where the bank has completed the foreclosure process and now owns the property.  These properties may also be known as "bank-owned" or "REO" properties.
  • A short sale is defined as a property sale where the lender is shorted on the mortgage payoff, meaning that the lender accepts less than the total amount due.  The seller of the property does not have enough liquid assets to pay any deficiencies.  In a short sale, the lender does not take ownership of the property but must approve the sale and agree to release their liens against the property before it can close.  Short sales are sometimes called "pre-foreclosures."

Foreclosure and Short Sale Information for Buyers

Foreclosures and short sales can be great deals for buyers because they are often priced below other similar homes in the marketplace.  But foreclosures and short sales also present special challenges in the real estate transaction.

What you should know about buying a foreclosure.

  • The foreclosed property may not be a great deal because REO sellers are obligated to get as much money for their investors as possible.  Usually condition has been taken into account in the pricing.  The seller may negotiate a bit but may not come down dramatically in price.
  • Sometimes the foreclosure is in bad condition and will not qualify for financing.  Many REO sellers will not allow repairs prior to closing.
  • Most REOs are sold "as is" and the seller will make no repairs.  Read the addenda required by the REO seller so that you know your rights regarding inspections and termination of the contract for condition issues.
  • If you are one of several offers on a REO property, you will be asked to make one last bid that is your "highest and best offer." 
  • An REO seller may not respond as quickly to your offer as a seller in a normal transaction.

What you should know about buying a short sale.

  • The seller must obtain approval from all his lienholders before a closing can take place.  This approval can take weeks or months to obtain and the timeliness of the approval is totally in the hands of the lienholders.
  • There is no guarantee that a lienholder will approve the short sale at all.
  • The seller may have no funds available to make repairs on the property.
  • The seller may receive other offers on the property as back-up offers while awaiting lienholder approval. 
  • The foreclosure process may proceed while awaiting lienholder approval.
  • You will have the right to terminate a short sale contract at any time prior to receipt of lienholder approval.

Foreclosure and Short Sale Information for Buyers

Contact me today at 704-814-6242 or via email using the form below for a current list of foreclosures and short sales in your price range and geographic area of interest.

To:  Carol Fox

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Carol Fox Real Estate Broker
101 E Matthews St #100
Matthews, NC 28105

Cell:  704-905-3935

Office: 704.814.6242
Fax: 800.818.7115

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