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.

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.