Short Sales and Foreclosures

What is a short sale?

Short Sales Madison WI

A short sale means the home is worth less than the balance on the mortgage and the Seller needs to get the offer to purchase approved by the lender as a contingency of the contract. Sometimes this is referred to as ‘upside down’. If the home is sold, the closing is “short” funds. That is why it is called a short sale. But typically in regards to the length of the transaction, there is nothing short about it. Sometimes a short sale can take many months of waiting and uncertainty.


  1. Buyer and Seller negotiate terms of the offer (and a contingency is added to the offer stating that the offer is subject to lender approval).
  2. Once the offer is accepted, the Seller submits an updated short sale package to the lender. This package includes the offer along with detailed information provided by the Seller regarding the hardship and financial information to prove that the Seller is in fact in financial distress and qualifies for a short sale.
  3. Once an accepted offer is submitted to the lender, the lender may negotiate further with the Buyer, reject or approve the proposed offer.
  4. Once the offer is approved by the lender, the buyer begins to address the other terms of the offer like inspection and financing contingencies.
  5. Once the offer is approved by the lender, the Sellers are able to negotiate the short sale conditions with the lender.

How are short sales different than foreclosures?

Madison WI Foreclosures

A short sale is pre-foreclosure. If a home is not sold in a certain amount of time, it will end up in foreclosure. The lender notifies the owners of a sheriff’s sale date and if the home isn’t sold by that date, foreclosure happens. Once the bank owns the property and the owners are vacated, the home is listed on the market as a foreclosure in a vacant state.


A foreclosed home (also known as a REO) is a bank owned property. The home went through the pre-foreclosure stages, was not sold to an outside party in the Sheriff’s sale and the bank has title. The benefit to purchasing a foreclosure is that you can close quickly and you can get a great deal.

  • What to consider in purchasing a Foreclosure property in the Madison Area:
  • You must have a pre approval letter (sometimes from the lender that is selling the home)
  • The bank would like to close quickly.
  • There is no disclosure of defects. The bank has never lived in the home, rarely have they entered the home and they don’t have any information about the history of the home, ages and dates of mechanicals, appliances, etc. Many times homes in foreclosure are neglected, abandoned and in bad condition (but not all).
  • You may be in competition with many other Madison buyers.

Contact the Alvarado Group with any questions or call (608) 251-6600.