A quick look at short sales vs. foreclosed properties, in the Phoenix metropolitan area real estate market.
A short sale, as opposed to a fore-closed home, is neither good nor bad, in and of itself. The real question is whether the house you are attempting to buy is worth the price you will have to pay.
Let's back up a moment, and discuss the difference between the two. Briefly, a short sale is where the home is worth less than the amount owed, and in order to sell the home, the lender(s) must forgive some of that debt. A foreclosed home is one that has passed that point, and the bank has re-possessed it, and is the actual owner.
If two homes in the same subdivision, with essentially the same features are offered for sale at the same price, one being a short sale, the other a foreclosure, the only real difference might be the ease with which the deal can be closed. With a foreclosure, the bank has already taken the loss, so a sale can be completed as easily as one from a private seller.
With a short sale, things may get a little complicated. Not only are you dealing with a seller, you also have to get the approval of the lender. Sometimes, the lender may be 100s of miles away, in a different state, and be unaware of prevailing market conditions. This can stall the process. Maybe, the listing agent has never dealt with the intricacies of a short sale before with potentially fatal results to the transaction. Some sellers may have been less than truthful (i.e. lied) on the loan application when they bought the house. Now, upon claiming hardship to garner a short-sale, those lies are often revealed, resulting in no short sale and criminal charges.
Also, as a buyer, be aware that some agents price short sales at ridiculously low levels, a practice with which I disagree, in order to suck in a buyer with whom to initiate the process. These are just some of the many pitfalls you may experience.
My advice is usually as follows; if you love the house that is a short sale, by all means, let's try to buy it. But do not let the sometime lengthy process deter you or cause you to lose, another readily available property that might come you way, that will serve your needs equally well.
So, are they good or bad? They are neither. The overwhelming considerations should be the price, and the ease with which you can consummate the transaction.
