"Preforeclosure" describes the stage in the foreclosure process.... as in delinquent, default, preforeclosure, foreclosure, post foreclosure (redemption)..
while "short sale" is the application of an acquisition technique.
Most, if not all "short sales" occur during the "preforeclosure" stage.
[addsig]
In a Pre-foreclosure, you negotiate with the owner (nominal owner that is; the bank usually has more $ at stake) to try to buy the house while helping the owner avoid foreclosure, during which they could lose the house and any equity they have. You make your best deal with an individual who may not understand all the details of the transaction, but who will have to trust you to agree to make the deal. Some are backed into a corner and know they aren't getting much, but they really have run out of alternatives.
In a short sale you deal directly with the bank. This requires you to present a fairly complex offer to the bank after they finish the foreclosure, get the owner out (usually), and thus control the property. There may be some negotiation. You need to convince them to sell you the house for less than they have in it, which requires some finessing, research, comps, documentation of repair costs, etc. Banks are usually pretty savvy to what's at stake, and can sometimes make their decisions based on what appears to be random criteria, some of which depends on their own overall bottom line at the moment in time you deal with tthem
Sorry, Loon, I can't go along with you on this....
You wrote: In a short sale you deal directly with the bank.
You must first come to an agreement and go into contract with the Seller. The Seller (or Seller's agent) seeks short sale approval from the lender. Short sale consideration is granted to the Seller. The Seller's cooperation is needed throughout the short sale process. (When negotiating the purchase of an REO, you would deal directly with the bank or their broker, the homeowner is no longer involved)
You wrote: This requires you to present a fairly complex offer to the bank after they finish the foreclosure, get the owner out (usually), and thus control the property.
That is incorrect. The application for short sale consideration and Proposal is made during the foreclosure process BEFORE the lender completes the foreclosure and the mortgagor remains in possession.
You wrote: You need to convince them to sell you the house for less than they have in it...
The mortgagee can't sell what they do not own. They don't sell the house. They (the mortgagee) simply agrees to accept less than they are due and permit the mortgagor to sell.
OK, SSPro, I stand down. Thanks for not ridiculing me too much. I like the idea of Short Sales, but find them to be too much work, at least for a generalist like me in my rural market area. I worked on one once and got mired in complications right away, with no end in sight. I think it takes real dedication to salemanship, detail, and likely a sense of specialization to pull them off like you do.
I was oversimplifying, conceptually, in an effort to articulate the distinction between Sub2 and Short Sales, and got sloppy. My point, and I think you'll agree, is that ultimately the both the lender and the seller have to agree to the sale and terms in a Short Sale. In a Sub2 deal, only the seller has to agree, that the responsibility for paying off the seller's loan on the property is neatly and cleverly "transfered" to the buyer without the bank ever knowing or needing to know (or care, for that matter) that its loan as been, effectively, "assumed" by the buyer.
"Preforeclosure" describes the stage in the foreclosure process.... as in delinquent, default, preforeclosure, foreclosure, post foreclosure (redemption)..
while "short sale" is the application of an acquisition technique.
Most, if not all "short sales" occur during the "preforeclosure" stage.
[addsig]
In a Pre-foreclosure, you negotiate with the owner (nominal owner that is; the bank usually has more $ at stake) to try to buy the house while helping the owner avoid foreclosure, during which they could lose the house and any equity they have. You make your best deal with an individual who may not understand all the details of the transaction, but who will have to trust you to agree to make the deal. Some are backed into a corner and know they aren't getting much, but they really have run out of alternatives.
In a short sale you deal directly with the bank. This requires you to present a fairly complex offer to the bank after they finish the foreclosure, get the owner out (usually), and thus control the property. There may be some negotiation. You need to convince them to sell you the house for less than they have in it, which requires some finessing, research, comps, documentation of repair costs, etc. Banks are usually pretty savvy to what's at stake, and can sometimes make their decisions based on what appears to be random criteria, some of which depends on their own overall bottom line at the moment in time you deal with tthem
Sorry, Loon, I can't go along with you on this....
You wrote: In a short sale you deal directly with the bank.
You must first come to an agreement and go into contract with the Seller. The Seller (or Seller's agent) seeks short sale approval from the lender. Short sale consideration is granted to the Seller. The Seller's cooperation is needed throughout the short sale process. (When negotiating the purchase of an REO, you would deal directly with the bank or their broker, the homeowner is no longer involved)
You wrote: This requires you to present a fairly complex offer to the bank after they finish the foreclosure, get the owner out (usually), and thus control the property.
That is incorrect. The application for short sale consideration and Proposal is made during the foreclosure process BEFORE the lender completes the foreclosure and the mortgagor remains in possession.
You wrote: You need to convince them to sell you the house for less than they have in it...
The mortgagee can't sell what they do not own. They don't sell the house. They (the mortgagee) simply agrees to accept less than they are due and permit the mortgagor to sell.
OK, SSPro, I stand down. Thanks for not ridiculing me too much. I like the idea of Short Sales, but find them to be too much work, at least for a generalist like me in my rural market area. I worked on one once and got mired in complications right away, with no end in sight. I think it takes real dedication to salemanship, detail, and likely a sense of specialization to pull them off like you do.
I was oversimplifying, conceptually, in an effort to articulate the distinction between Sub2 and Short Sales, and got sloppy. My point, and I think you'll agree, is that ultimately the both the lender and the seller have to agree to the sale and terms in a Short Sale. In a Sub2 deal, only the seller has to agree, that the responsibility for paying off the seller's loan on the property is neatly and cleverly "transfered" to the buyer without the bank ever knowing or needing to know (or care, for that matter) that its loan as been, effectively, "assumed" by the buyer.
Well, it was pretty late when you posted...and though I usually address posts privately, I really didn't want ironworker to get confused...
Thanks so much guys. This cleared it up for me. I appreciate the help. Keep up the great work. It helps newbies like me tremendously.