Buying a Home: A Short Sale vs. A Foreclosure & What Is Equity? | Molly's Money


  1. Thank you for writing this, Molly! My husband and I are wanting to buy a house in the next couple of years, so this post was great in helping me to understand different types of sales 🙂

  2. Molly

    I bought a foreclosed property and I did find that it needed some investment (mainly because the previous owners decided to walk away with all of the appliances) but I have found that most banks are, to a certain degree, keeping the properties in a semi-decent condition. I also work with insurance inspectors and we have found that they are also doing major repairs (like replacing roofs) because they know that a buyer with a mortgage won’t be able to secure a loan without insurance and you can’t get insurance if the property has issues, in the past they gave the buyer insurance for 30 days so that they could close and do the repairs, but that changed in recent days.

    Also as far as pending liens, no mortgage company will disburse the payment to the seller without clean title and title insurance (it protects the buyer/bank from future claims, maybe they find out the property was built over an Indian burial ground or something unforeseeable like that), so unless you are a cash buyer that risk should be taken care of with the clean title. (I don’t know if that works the same all over the Country, I would think so, but for reference I live in Florida)

    Hope this helps a little, thanks for sharing, I also wish someone would have shared this with me when I started looking for a house.


  3. Hi Molly! I’m an avid reader of the blog and enjoy your posts! We also live and bought in the Triangle, Durham, to be exact. I understand Molly’s Money is great way to get financial information out there in a way a lot of readers can digest- but I think it’s important in this particular post to mention interest and balance on the loan and how that affects equity! When one pays (as a lot of people do) the standard repayment amount on a mortgage each month- not all of that money is going to the principal balance of the loan. So, just because you’ve paid $60,000 in mortgage payments, the amount you owe to the bank isn’t going to decrease by $60,000. Only a portion of the standard monthly payment will go to the principal balance. I realize this makes the general idea a lot more complicated- but for those just learning, it’s good knowledge to know that just because you’ve paid that $60,000 to the bank doesn’t mean you now have $60,000 in equity! You have $60,000 – x amount of interest paid = equity. 🙂

    1. GREAT point, Adrienne!! I was trying to keep it really simple for explanation sake… but you are definitely right. I have edited the post to add that point. Thank you so much for pointing that out! (Sometimes when I get to explaining things too simply I leave out important details. Whoops!)

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