Short Sales VS Tax Sales VS Foreclosures? (foreclosure, mortgage, accept)

[NowOrNever]

What is the major difference between the three?

[MrRational]

Tax sales don't belong with the other two.


The other two are part of a continuum of the process:
stop paying your mortgage.... get dunned by the lender... the lender finally makes it official with a "NOD" (legal document "notice of default")... some of these new "debtors in possession" attempt to sell their albatross for less than what they owe and ask the lender to go along with the idea creating a "short sale"... few will be successful before the lender gets really serious and sues them for possession by "foreclosing" on them

[NinaN]

Short sales are uncertain - I think about 40% of them actually close in this market (up from about 30% last year). But usually the owner is still in the house and somewhat taking care of it so it might be in better condition than a foreclosure which is owned by the bank.

[Bill Keegan]

Originally Posted by NowOrNever

What is the major difference between the three?

A short sale is a sale of property by the homeowner, where the proceeds of the sale are not sufficient to pay off the outstanding debt on the property, and the lender has agreed to accept an amount SHORT of the full debt.

A foreclosure is the taking of the property be a creditor who has lent money with the property used as colateral. If you fall behind on the payments, the lender begins a process (which differs state to state) which results in the lender taking ownership of the property. The property becomes what you may have seen classified as REO or Bank Owned property.

A tax sale is the sale of tax debt by the municipality. When you buy a tax debt, you pay the tax bill owed by the property to the municipality, in return for interest on that debt, right of first refusal to purchase future tax debt on the same property, and a senior position for repayment of the debt. If enough time goes by without that tax debt being repaid by the property owner, the holder of the debt may initiate a sale of the property, in order to collect the debt and interest.