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Foreclosure vs. Short Sale — What's the Difference?

By Tayyaba Rehman — Published on November 15, 2023
Foreclosure is when a lender seizes property due to unpaid mortgage, while a Short Sale is when property sells for less than owed, with lender approval.
Foreclosure vs. Short Sale — What's the Difference?

Difference Between Foreclosure and Short Sale


Key Differences

Foreclosure occurs when a homeowner defaults on their mortgage payments, leading the lender to take legal action to seize the property. This process is typically initiated after a series of missed payments. In contrast, a Short Sale arises when a homeowner, unable to meet mortgage obligations, sells their property for less than the amount owed, but with the lender's approval.
In a Foreclosure, the lender usually auctions the property, often resulting in a lower sale price. The homeowner loses all rights to the property. On the other hand, a Short Sale is a more collaborative approach between the homeowner and the lender. In this scenario, both parties agree on a sale price, even if it's less than the mortgage amount.
Foreclosure can have negative impacts on a homeowner's credit score, often more severe than a Short Sale. A Short Sale, though also affecting credit, might be seen more favorably since the homeowner took proactive steps to address the financial situation.
During a Foreclosure, the homeowner might be forced to vacate the property sooner, as the lender aims to recoup their losses quickly. With a Short Sale, the homeowner typically remains in the home until the sale completes, providing more time for relocation.
While Foreclosure is generally the last resort for lenders after attempts to reconcile the debt have failed, a Short Sale can be initiated by the homeowner, providing more control over the situation and potentially better terms.

Comparison Chart


By the lender after missed payments
By the homeowner with lender's approval

Impact on Credit

Severe negative impact
Negative impact but potentially less severe

Control over Process

Primarily with lender
Collaboration between homeowner and lender

Sale Method

Often through auction
Standard sale, but at a price less than owed

Time in Property

Homeowner may have to vacate sooner
Homeowner stays until the sale completes

Compare with Definitions


Result of defaulted mortgage payments.
After several missed payments, Jane faced the threat of Foreclosure.

Short Sale

Sale price is less than outstanding mortgage.
The property went on a Short Sale, attracting buyers looking for a good deal.


A legal process where lenders seize property.
Due to unpaid debts, the bank initiated a Foreclosure on John's house.

Short Sale

Sale of property for less than owed.
Tom and Lisa opted for a Short Sale to avoid Foreclosure.


Lender action to recoup mortgage debts.
The bank moved to Foreclosure after the homeowner failed to negotiate repayment terms.

Short Sale

Homeowner-initiated sale to manage debt.
The declining market value prompted Sarah to consider a Short Sale.


Often results in property auction.
The beautiful mansion went to Foreclosure and was auctioned off.

Short Sale

A pre-foreclosure strategy with lender approval.
With the bank's consent, the family started the Short Sale process.


Termination of homeowner's property rights.
Facing Foreclosure, Mike sought legal advice to retain his home.

Short Sale

A financial relief option for homeowners.
Facing financial challenges, a Short Sale became the viable option for the couple.


The act of foreclosing, especially a legal proceeding by which a mortgage is foreclosed.


A property that has undergone foreclosure
Decided to purchase a foreclosure.


(legal) the proceeding, by a creditor, to regain property or other collateral following a default on mortgage payments


(psychoanalysis) The absence of a symbolic father for a fatherless child, as a cause for psychosis.


The act or process of foreclosing; a proceeding which bars or extinguishes a mortgager's right of redeeming a mortgaged estate.


The legal proceedings initiated by a creditor to repossess the collateral for loan that is in default

Common Curiosities

Who initiates a Short Sale?

The homeowner initiates it, but it requires the lender's approval.

How does a Short Sale impact a homeowner's credit?

It negatively impacts credit but is usually less severe than Foreclosure.

What triggers a Foreclosure?

Defaulting on mortgage payments typically leads to Foreclosure.

Who has more control during a Short Sale, the lender or homeowner?

It's a collaboration, but the homeowner initiates and proposes terms.

Are there benefits to choosing a Short Sale over Foreclosure?

Yes, including a potentially lesser credit impact and more control over the sale.

How long does a Foreclosure stay on one's credit report?

Typically, a Foreclosure remains on a credit report for seven years.

Which is faster, Foreclosure or Short Sale?

It varies, but Foreclosures can often be quicker due to legal mandates.

Does Foreclosure always result in an auction?

Often, but not always. Lenders may choose different methods to sell.

Do all Short Sales succeed?

No, success depends on factors like market conditions and lender agreement.

Which process allows the homeowner more time in the property?

Short Sale typically allows more time than Foreclosure.

Is a Short Sale always approved by lenders?

No, lenders evaluate if it's in their best interest before approving.

Which has a more severe impact on credit, Foreclosure or Short Sale?

Foreclosure generally has a more severe impact than Short Sale.

Can a homeowner stop a Foreclosure?

Yes, by settling debts, modifying the loan, or other legal means.

Can a homeowner profit from a Short Sale?

No, proceeds go to the lender to offset the outstanding mortgage.

Can a homeowner buy back their property after Foreclosure?

Generally, no. Once Foreclosed, the property is usually sold to recoup the lender's losses.

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Author Spotlight

Written by
Tayyaba Rehman
Tayyaba Rehman is a distinguished writer, currently serving as a primary contributor to As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.

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