Short Sale vs. Foreclosure: What’s the Difference?

Buchalter & Pelphrey Attorneys At Law

If you’re behind on mortgage payments or otherwise overwhelmed with debt, you have several options at your disposal. The best thing to do is to retain professional counsel as soon as possible—this will help you maximize your options, as you will start to lose certain opportunities as time goes by and creditors begin to take drastic action. In the meantime, however, here is a close analysis of the differences between a short sale and a foreclosure.

Short Sale

A short sale is a voluntary process in which you sell your home for less than what you owe (e.g. selling a home for $200,000 even though you owe $250,000 on your mortgage). Because your lender is not receiving the full amount through the sale, they must approve of the transaction ahead of time. This is why the short sale process can take a great deal of time (and require extensive paperwork).

While a short sale frees you from the obligation to continue paying your mortgage, you will typically become responsible for the deficiency balance. In the above example, this balance would be $50,000 ($250,000 minus $200,000).

A short sale will also have a negative impact on your credit, but it won’t be as severe as if your home were foreclosed. Generally, you will not have to wait as long after a short sale to obtain a new mortgage.


Foreclosures are involuntary, meaning your mortgage lender will initiate it when you are behind on your payments. The lender will eventually sell the property at auction after you move out or are evicted.

While the exact process (i.e. timeline, required court oversight, notices, etc.) differs from state to state, foreclosure is generally much faster than a short sale. As mentioned above, a foreclosure will do more damage to your credit score than a short sale.

Generally, foreclosure is what happens when you run out of options as a distressed homeowner. Many people believe that letting the lender foreclose their home is what’s best for their situation, but this is not always the case—especially if the lender has not yet begun the foreclosure process. In most cases, distressed homeowners have more debt-relief options than they realize.

Evaluating All Options at Your Disposal

You may believe you have only two choices: a short sale or foreclosure. However, our team at Buchalter & Pelphrey Attorneys At Law has more than 45 years of experience helping clients find the right solution to their unique financial crisis. We may help you implement a short sale, but we can also discuss all potential alternatives. One such alternative might be bankruptcy, which could help you reduce your debt while keeping your home and other assets.

Let’s discuss your situation together. Call (321) 320-6088 or contact us online to schedule your free case review today!

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