What is the difference between short sale, preforeclosure, foreclosure in Kansas and how do they differ in regards to when to make offers? - Kansas Real Estate

Q: What is the difference between short sale, preforeclosure, foreclosure in Kansas and how do they differ in regards to when to make offers? What exactly comes first second or third and any auctions or whatever after…how can public buy these foreclosed deals?
Adam D. from Overland Park, Kansas

A: First, since you asked about Kansas, I will address the questions in perspective of Kansas laws. Kansas and Missouri have many differences on their foreclosure procedures.

I will answer your question in the order they come in during the foreclosure process.

Step 1: A Kansas Short sale – the homeowner is selling their home and does not have equity nor the funds to close the real estate transaction and needs an approval from the mortgage lender to discount the mortgage lien. Typically the homeowners owes more than the market value of the home and the lender will approve a lower payoff than what is owed on the mortgage loan. Although, short sales have not had a public notice by the mortgage lender, the home is on the real estate market and is available to home buyers to purchase. A pre-approved short sale can take 30 days to negotiate and an unapproved short sale can take up to 2 years to approve if there are multiple liens and investors. Short sales can offer the best deals.

Step 2: A Kansas Pre- Foreclosure Sale  –  The homeowner is typically more than 90 days late on their mortgage payments and lender has started foreclosure process with a public notice of trustee sale. In Kansas a pre-foreclosures can be on the real estate market and are available for home buyers. They are treated much like a short sale and need to be approved by the mortgage lender. Pre-foreclosures can offer some good deals and can take up to 3 months to negotiate.

Step 3: A Kansas Auction Sale or Sheriff's Sale  –  The homeowner has not corrected the arrearages of their defaulted mortgage loan and the home has been foreclosed on. Now the trustee is auctioning the property to the highest bidder which may be the lender. A home buyer is welcomed to make a bid on a auction - sheriff's sale, but will need cash or certified funds. The funds will be held for a period of 90+ days, which is called a redemption period.

Step 3: Kansas Redemption Sale -  The homeowner has a period of 90+ days to redeem the foreclosure sale. If they are not able to redeem, they maybe able to sell their rights to the person who bought the home at the Sheriff;s sale or to another investor. An investor who has bought the redemption rights may buy the home from the sheriff's office.

Step 4: Kansas Foreclosure Sale – If the home has not been redeemed, the mortgage lender will work on a clear title to signal that the foreclosure process has been completed. Once they have a clear title the mortgage bank will add the property to their Real Estate Owned Inventory. The mortgage lender will list the property with a real estate agent and sell the property as an REO property.

Step 5: Kansas REO Auction - The lender as attempted to sell the home as a REO foreclosure property and has been unsuccessful. At this point, the mortgage lender will attempt to sell the property as an REO Auction Property. Next to short sales, REO Auctions can offer home buyers some great deals.

A home buyer can buy the property during any of the time periods with caution and due diligence. Short sale and REOs are typically listed with a Realtor, have low risk for purchasing and a home buyer can get a mortgage. Auctions have maximum risk, a home buyer will either need cash, certified funds or a fast lending option. 

Each step offers unique challenges. I recommend any buyer to higher and experienced professional and do their due diligence.

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Blog post written by the Dowell Taggart Team of RE/MAX Premier Realty 

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