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What is the difference between a short sale and a foreclosure?

On Behalf of | Sep 20, 2017 | Commercial Real Estate |

If your business is looking to expand for the first time, you may never have paid attention to the buying process before. There are terms associated with different types of sales and they are in place in hopes of making note of important differences in different types of commercial property sales. While they aren’t as common as residential homes, some commercial properties for sale are “short sales” or “foreclosures.”

These types of properties are usually categorized under a special section of sales so that buyers know instantly the type of property that they are looking at. There can be upsides and downsides to purchasing properties categorized as a short sale or a foreclosure. These sales are not “for sale by owner”; usually they are bank owned. You can get a good deal on these properties, but sometimes there is more involvement needed on behalf of the buyer in time, attention and/or monetary responsibilities.

A “short sale” is a property that is being sold for less than the property is worth, usually the total balance the previous owner owed on the mortgage. A “foreclosure” is a property that the bank has repossessed only to sell it, usually in “as is” condition. While a deal can be had by the new buyer, there may be longer waiting periods to close or more fees to pay at closing. Also, oftentimes a property will have issues due to either an extended abandonment of the property or negligent upkeep on behalf of the previous owner who was in arrears.

Clearly, short sales and foreclosures may not be the best option for every business. For those looking to transition quickly, this may especially be the wrong choice. However, newer businesses looking to expand may see this as an attractive investment. If time is on your side, a business may not need the purchase period to be swift and efficient. Consider the needs of your business before committing to a short sale or foreclosure.

Source: realestate.findlaw.com, “Buying your First House,” Accessed September 18, 2017