Owning a home is a noble aspiration, but sometimes the responsibilities of homeownership can become overwhelming. What should you do if you're unable to keep up with mortgage payments? When it becomes evident that holding onto your home is no longer feasible, you may risk facing foreclosure. Additionally, if your home's value is lower than what you owe, this can create further complications, potentially leading you to ask for a short sale with your lender.

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Foreclosure vs. Short Sale
In this article, we will explore the differences between foreclosure vs. short sale to help you understand these two options.
Although foreclosure and short sale share similarities, they differ significantly in terms of timelines and consequences.
Are you facing a situation where you need to choose between foreclosure and short sale? Or do you simply want to understand the implications of each? We will examine the key distinctions and compare both processes to provide you with a clear understanding.
Foreclosure
Foreclosure is a legal process initiated by a lender when a homeowner (borrower) is unable to make mortgage loan payment for a significant period of time. In this process, the lender assumes ownership of the property and evicts the defaulting borrower.
The entire process of foreclosure starts when the borrower stops making payments for about three to six months.
What Happens During The Foreclosure Process?
It starts with the lender serving a ‘notice of default’ with the county recorder’s office. The notice is to inform the homeowner that foreclosure proceedings have started and that he/she stands at risk of losing the property and getting evicted if the proceedings go through.
Once the notice of default is served, the ‘pre-foreclosure period’ starts. This period can last between 30 to 120 days.
During this period, the borrower has the opportunity to work out a way to resolve the debt.
In unfortunate instances where debt is not resolved at the end of the pre-foreclosure period, the lender will move forward with foreclosing the property.
This means that the lender takes over ownership of the house, evict the borrower, and put the home up for sale. The foreclosed property may be sold at an auction or, in few cases, through traditional real estate agent.

Short Sale
Short sale is a process that is mostly initiated by a borrower to get rid of a mortgage they can no longer afford.
It is an alternative to foreclosure that can also be agreed upon during the pre-foreclosure period when there is no chance of carrying-out a repayment schedule. The borrower has to be eligible for short sale.
For a short sale to happen, the lender has to agree to the sale with the understanding that the price might not cover the balance of the mortgage.
This is normally the case when a property has depreciated in value since it was purchased. Depending on whether the property is in a recourse of non-recourse state, the borrower may have to offset the balance of the transaction.
What happens During The Short Sale Process
In short sale, the lender – typically a bank – needs documentations that explains that the short sale is the right step to take. This is majorly because they are going to accept a lesser amount than the total mortgage owed.
It is often a viable option, however, since it mitigate additional fees and costs for both the creditor and borrower.
When a short sale is approved, the process is a little different from what happens when a homeowner is trying to sell.
The buyer will negotiate with the homeowner and then proceed to seek approval from the bank.
A traditional real estate agent can be involved in the process but the lender will ultimately decide the winning offer.
Once the sale goes through, the lender receives the full payment. The borrower is normally free from any financial responsibility except in rare instances where he/she is required to offset the deficiency.

Foreclosure vs. Short Sale: What Are The Key Areas Of Distinction?
Though foreclosure and short sale have the same goal, there are major differences between the two. Here, we will dwell on the key differences on major consequences.
Timing
One of the key differences of the two process is how long they take to be completed. For several reasons, short sales take longer to be completed.
This is majorly because it requires several paperwork that need to be approved.
The process of vetting different buyers also take time. For foreclosure, things can move a lot faster since the lender is the major party involved and is intent on recouping as much of the investment as possible.
Involvement of the Homeowner or Borrower
The level of involvement of the borrower differs significantly in the two processes. In short sale, the borrower is involved every step of the way. In many instances, the borrower has to initiate the process. He/she will also participate actively in finding the right buyer for the home. The buyers will negotiate with the homeowner or his/her agent before approaching the bank for approval. On the other hand, the bank drives almost the entire process in foreclosure.
Consequences to Homeowner or Borrower
Foreclosure and short sale have real impact on the credit score of the borrower but there is significance difference in the severity of the impact.
Foreclosure is more severe than short sale.
Credit score can drop up to 150 points after a short sale but the borrower should be able to buy a new home in no time.
After a foreclosure, however, the borrower will have to wait for up to five years before buying a home again. Foreclosure will also stay on the individual’s record for seven good years.
Conclusion - Foreclosure vs. Short Sale
There you have it! The above write up takes a look at the differences between foreclosure and short sale. Foreclosure vs. Short Sale are two sides of a bad coin.
Though they both mean that the homeowner will ultimately lose the property. However, their overall consequences differ significantly. We have covered the key differences to help you understand better and make informed decisions.
If you are needing to sell a property that is in preforeclosure or facing a short sale call Fresh Start Property Solutions. Let us discuss the best and fastest ways to get the property sold.

Foreclosure vs. Short Sale? Whether you're looking to sell your home with an agent or need to quickly offload a home due to probate, preforeclosure, tax liens, needing repairs, or you just need a quick cash offer, I'm here to help. As an experienced real estate professional with Fresh Start Property Solutions, I offer flexible options to meet your needs. I can list your home on the market for top-dollar or get you a fast cash offer. It's your decision, you decide, I make it happen. Reach out to me today to discuss how we can get your home sold fast or for the highest possible price.

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