Short sales and foreclosures both refer to possible outcomes for homeowners perilously behind on mortgage payments. These options arise for those who don’t have the ability to pay off their debt or restructure their mortgage loan with their lender. Both outcomes allow the borrower to get out of the mortgage, albeit, with different financial injuries.
A short sale means that the homeowner sells the house for less than what is owed on the mortgage. The seller may take a financial hit on the house and their credit score, but the seller also has the opportunity to avoid an official foreclosure on their credit rating. A short sale needs to close prior to the foreclosure date set by the lender.
The main difference between a short sale and a foreclosure timing.