A "Standard Sale" is that which is being sold by an owner with equity. The owner is not in financial trouble (upside down) as far as this property is concerned. There is sufficient money to close the escrow. These listings are becoming more and more common inasmuch as those very low priced fixer-uppers are now being resold as rehabbed (all fixed up) properties.

An owner of a property may be "in trouble" as far as his loan(s) is concerned. Most likely it is because he owes more than the house is worth AND the interest rate has gone up on either one of the loans. This has rendered the house payments unmanageable. He has contacted the lender(s) and find they are just "unsympathetic." Necessarily, the owner becomes a seller and contacts an agent to list the home on the MLS. When a seller submits an offer to his lender, he is petitioning to the lender that they sell "short" of what is owed. Hence, a "Short Sale."

The listed price may be too high and no offers are received. Or, the contrary can occur: the listed price is too low and a bidding war occurs. Many lenders accept the highest and best offer to "consider" passing it on to their Negotiation Department for their approval or counter-offer(s). Waiting for approval of a short sale - at any price - can take literally months. It is very common for a buyer to submit an offer which will not be substantiated by the eventual appraisal.

Another aspect to a seller and his lender's upside-down property value and its accompanying loan is: seller generally has a very good reason for being late with his payments. He has lost his job and his credit rating. Negotiations to reduce the loan amount, interest, etc. have been for naught due to the fact, the seller cannot qualify for any loan - even a much reduced loan.

After an offer is accepted and an escrow is opened, a value appraisal of the property is ordered by your lender. Appraisals are mandatory to prove to your lender that your offer matches the actual value of the property. Seller should adjust to this value. Many do not and the escrow is cancelled if a compromise cannot be worked out.

Many lenders holding notes on properties which have not seen any payment in their coffers from delinquent homeowners for months and months have come to the conclusion that it is productive for them to accept offers which meet today's value. This is Great for You... the buyer. So, don't cringe from ALL Short Sales..

In the meantime, seller has stopped making payments (or hasn't for many months). The lender progresses with a Notice of Default (NOD) and the foreclosure process begins. Within 120 days the loan must be brought current or paid off. When the property reverts (sold at auction) to the lender at the end of the 120 days, the lender will set a sales price and list it in the MLS. This takes a bit of time... could be months, while the property sits vacant.

The property is classified as an "REO" (Real Estate Owned). Essentially, it is a Foreclosure or Repo (repossession). The MLS listing and sale process is similar, but instead of dealing with the homeowner (seller) as in a Short Sale, you are dealing directly with the new owner, the "Bank." A bank could be one with branches throughout the U.S. Or they might be an investment company with no brick and mortar building with tellers, etc.