Short Sale VS. Foreclosure

As unfortunate as it can be when homeowners fall behind on mortgage payments and must face the possibility of losing

their homes, short sales and foreclosures provide them options for moving on financially. The terms are often used

interchangeably, but they’re actually quite different, with varying timelines and financial impact on the homeowner.

Here’s a brief overview.

A short sale comes into play when a homeowner needs to sell their home but the home is worth less than the remaining

balance that they owe. The lender can allow the homeowner to sell the home for less than the amount owed, freeing the

homeowner from the financial predicament.

On the buyer side, short sales typically take three to four months to complete and many of the closing and repair costs

are shifted from the seller to the lender.

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On the other hand, a foreclosure occurs when a homeowner can no longer make payments on their home so the bank

begins the process of repossessing it. A foreclosure usually moves much faster than a short sale and is more financially

damaging to the homeowner.

After foreclosure the bank can sell the home in a foreclosure auction. For buyers, foreclosures are riskier than short

sales, because homes are often bought sight unseen, with no inspection or warranty.

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