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What is the difference between a short sale and a foreclosure?

  • July 23 2012 - US
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Answers (4)

Profile picture for NinaHarris
A short sale is when a home owner's mortgage is "under water" and needs to sell due to hardship.  The home's selling price is brought down to market value. The bank agrees to take the loss between what is owed on the mortgage and current market value. Normally, the seller is not liable for the difference, his credit is affected for 2 to 3 years but is able to purchase another home after this time period.

In a foreclosure, the bank reposses and owns the property. The home is sold under market value.  In the mean time, the bank is responsible for the property taxes & insurance. Normally, the condition of the home is not as good as a home that is sold as a short sale. The foreclosure will stay on the previous home owner's record for 7 to 10 years.
  • August 26 2012
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In a foreclosure, you basically walk away from the property, the bank takes the property, then depending on your state and your contract, they might look to you to make up the difference between what you owe and what the property ultimately sells for.  Everything's between you and the bank.

In a short sale, you get the bank to agree to take less than what you owe on the property so you can sell it to another person at a reduced price.  You generally propose a price to the bank based on what you think the property is worth, then the bank does its own evaluation of the price.  (This way, the property isn't being sold for less than what the market can command and the bank suffers as little loss as possible.)  Then, the property is put up for sale by you or your agent. 

The chief difference between the two processes is the presence of a 3rd party (a buyer) who buys the property from you with the bank's permission.  Good luck!

Bob Greeley
Inside Out Real Estate Inspections, LLC
Virginia Beach, VA 
  • August 25 2012
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Profile picture for SOLDbyTKS

Short Sales have not  yet gone into the  Forclosure process. In a Short Sale the Bank (lein holder ) has agreed to take less for the home that is owed on the property to avoid having to foreclose on the property. (There can be more than one lien holder)You are dealing with the home owner but, all offers are subject to the 3rd party approval.

In a Foreclosure the home owner has already "lost" the home to the lien holder. The lien holder now owns this property.  In most cases you are dealing with  a corrporation or bank when it is listed with a real estate agent. 

For a better understanding contract a local real estate agent.

  • July 23 2012
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Profile picture for B Mike West
In a foreclosure, the lien holder takes the home back because the homeowner/borrower stopped paying the mortgage.  On a short sale, that homeowner negotiates with the lien holder or holders, comes to an agreement with them and walks away from the property with their head held high because they have had some control over the process.

Here is a short video from YouTube that may help: http://youtu.be/u7SDwUmEAuU
  • July 23 2012
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