What's the Difference Between a Short Sale and Foreclosure?

Two options for homeowners who fall behind on mortgage payments are a short sale and foreclosure. While the prospect of losing a home is a hard reality that many people face, it's important to understand the difference between these two processes. How long do short sales and foreclosures take? Which is more detrimental to a borrower's credit? Let's discuss the details. What is a short sale? A short sale happens when the owner owes more on the mortgage than the market value of the property. During this process, they are essentially asking the lender to accept a lesser amount than the total it's owed. If the bank accepts the terms, the debt will be settled and the borrower released from any further liability once the short sale is closed, says Realtor® Paola Martinsen with Equity Real Estate in Murray, UT.