Short Sale vs Foreclosure - Differences, Pros, and Cons

When you hear short sale and foreclosure, you may have many questions about them, like what are they and the differences between them.

A short sale occurs when a recent financial burden is put on homeowners (medical bills, divorce, job loss, etc.). The homeowner will go to their lender and ask them for a short sale, meaning they sell for less than what's left of the mortgage. A short sale can take up to a year to process, and has less of a negative effect on your credit(though still not great for it). The lender may not always allow a short sale. If there is a cosigner, the lender may put them in charge of the payments, unless the lender see a potential for more money through a foreclosure, then that will be the option. With a short sale, the home owner may be able to purchase another home almost immediately due to the less severe effect on their credit. Before going for a short sale, contact your lender and see if there is anyway to revise the payment plan or obtain a loan modification.

A foreclosure happens when the homeowner is not making payments, but hasn't notified the lender of any financial issues; or they have already left the property. For foreclosures, the lenders do not need to communicate with the homeowners in the decision, the owners will be evicted and the house will be sold (most likely to a trustee sale). Foreclosures have more of a negative affect on the homeowner's credit, it will last 7 years on a credit report and the owner will have to wait 2-7 years before purchasing a home.



Though a foreclosure will happen quickly and get rid of the house burden, it is incredibly damaging to your credit. A short sale is a longer process, but will have a better impact on your credit than a foreclosure. Sometimes extra steps is worth it!