Short Sale vs. Foreclosure
By Debbie James, July 23, 2010
The difference between a short sale and a foreclosure is that with a short sale the seller still has control of the property, whereas a foreclosure is bank owned, (and also called a REO, real estate owned).
Here are the definitions:
A short sale is a sale which the sale proceeds fall short of the balance owed on the property’s mortgage. Typically this occurs when a borrower (seller) cannot make the payments on their loan. The lender decides that selling the property at a loss is better than the cost of foreclosing, which can cost the lender upwards of $70,000-$80,000! Both parties must consent to the short sale process. This agreement does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.
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