Short Sale vs. Foreclosure: What’s the Difference?

Short Sale vs. Foreclosure: What’s the Difference?

  • Heather Smith
  • 11/3/22

There are a few different scenarios for homeowners that are struggling to make their mortgage payments or are “underwater” on their homes (and owe more than what it’s worth)—including short sales and foreclosures.

But what, exactly, are short sales and foreclosures, and what’s the difference between them?

recent article from answered key questions people have about short sales and foreclosures, including:

  • What is a short sale? A short sale happens when a homeowner’s mortgage is higher than the market value or sale price of the home when they want to sell; in other words, they’re “short” on what they owe. In a short sale, the lender agrees to settle the debt for a lower amount than what’s due on the mortgage—and the home is then listed for sale through a real estate agent.
  • What is a foreclosure? A foreclosure happens when a homeowner is seriously past due on their mortgage payments (after three to six months of missed mortgage payments, the lender issues a Notice of Default, which begins the foreclosure process). If they’re unable to settle their loan debt, either through a short sale or by paying off the mortgage balance in full, the lender is then able to either sell the property to a third party through an auction, or take ownership of the property.
  • What’s the difference between the two? There are a few key differences between short sales and foreclosures, including time frame (short sales can take up to a year to close, while foreclosures move much more quickly) and impact on the homeowner’s ability to buy another home (after a short sale, homeowners can generally purchase a home right away—while people who went through foreclosures will have to wait five years).

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For most families, choosing a new home is the biggest financial decision they will ever make. There are many complicated decisions involved in choosing a home. As one of the top real estate professionals in the local market, I'll negotiate the best prices and terms for you and answer all of your questions as they arise.