An Overview on how are they differ

As unfortunate as it can be when homeowners fall behind on mortgage payments and must face the possibility of losing their home - short sales and foreclosures provide the home owner a way of moving on financially. Though these terms are often used interchangeably, but are actually quite different. Short sale and foreclosures have many differences with varying timelines and financial impact on the homeowner so here is a brief overview-

Short Sale

Remember the term upside down? A short sale comes into play when  homeowner needs to sell their home but the home being sold has a lower value than the remaining balance owed on a mortgage. The lender can allow the homeowner to sell the home for less than the remaining balance that they owed, freeing the homeowner from the financial predicament. On the buyer side a short sale typically takes three to four months to complete and many of the closing and repair costs can be shifted from the seller to the lender. The HAFA program was created to help speed up the process for both buyers and sellers.


Unlike a short sale a foreclosure means the bank already began the process of repossessing the home after a homeowner can no longer make payments. This is more financially damaging to the homeowner for obvious reasons. After the bank has foreclosed on the home which can take up to 930 days for a government loan in New Mexico, then the bank can sell the home in a foreclosure auction. For buyers, foreclosures are riskier than short ales, because the homes are sometimes only available sight unseen and/or with out any warranty nor inspection. Bringing many unknowns to the table for a buyer.