When you're struggling to make mortgage payments, it's easy to feel like you're out of options. But if you're underwater on your loan, knowing the difference between a short sale and a foreclosure could make all the difference. Both involve selling your home for less than what’s owed—but how they affect your finances, credit, and future is very different.

Let’s break it down clearly and simply.

What Is a Short Sale?
A short sale happens when a homeowner sells their property for less than the mortgage balance and the lender agrees to accept the reduced amount. It requires approval from the lender, but it is a voluntary process initiated by the homeowner.

> The homeowner works with a real estate agent to list and sell the home.

> All proceeds go to the lender, and they forgive the remaining balance (in most cases).

> The process can take several months, but allows you to avoid foreclosure.

Learn more about how short sales work here.

What Is a Foreclosure?
Foreclosure is when the lender takes legal action to reclaim the property after missed payments. It’s an involuntary process initiated by the lender.

> The bank takes control of the home and sells it at auction.

> You lose the home and any equity in it.

> It creates a major negative impact on your credit and can limit your ability to buy another home for up to seven years.

Key Differences at a Glance

Homeowner Initiates:                                                           
Impact on Credit:   Moderate (usually 50–150 points)
Timeline to Buy Again:   2–4 years
Public Record:   Not always public
Control Over Sale:   Homeowner has more control

Lender Initiates: 
Impact on Credit:   Severe (often 200+ points)
Timeline to Buy Again:   Up to 7 years
Public Record:   Becomes public record
Control Over Sale:   Lender decides when and how to sell

Why Most Homeowners Choose a Short Sale

Choosing a short sale can help you:

> Preserve your credit and re-enter the housing market sooner.

> Avoid eviction or legal proceedings that come with foreclosure.

> Control the timing and sale process rather than having your home auctioned off.

We’ve worked with thousands of homeowners going through financial hardship, and most find a short sale to be a more respectful, less damaging solution than foreclosure.

Read more about how the two compare on our dedicated Short Sale vs. Foreclosure page.

Need Help Navigating the Process?
We're here to help you explore your options without judgment or pressure. Our team works with homeowners across the country and specializes in simplifying the short sale process.

Visit our Homeowners Page to get started, or reach out directly through our Contact Page.