Difference between Short Sale or Foreclosure

As difficult as it can be when homeowners fall behind on mortgage payments and will face the reality of losing their homes, short sales and foreclosures provide them options for moving on financially. The terms are frequently used interchangeably, but they’re actually quite different. The varying timelines and financial impact on the homeowner need to be examined

A short sale occurs when a homeowner needs to sell their home but the home is worth less than the remaining balance that they owe. The lender may allow the homeowner to sell the home for less than the amount owed, getting the homeowner out of a financial predicament.

Short sales typically take three to four months to complete for the buyer and many of the closing and repair costs are are now the lender responsibility instead of the seller.

However, a foreclosure takes place when a homeowner no longer makes payments on the home and the bank starts the process of repossessing it. Foreclosures usually take less time than a short sale and are more financially damaging to the homeowner.

After a foreclosure the bank can hold a foreclosure auction. Foreclosures are riskier than short sales for buyers, because homes are often bought without inspections or any warranty.