A short sale is where the amount owed against the property is more than the value of the property.  A foreclosure sale is where the property has been foreclosed due to a default and a creditor forecloses it’s lien against the property.  The property is then sold at an auction sale and is thus foreclosed upon.

A short sale occurs when the homeowner, typically thru a Realtor®, files a short sale package with the lender requesting them to accept less than what is owed on their lien.  During the process the lender will do an appraisal of the property, request financial information from the homeowner including tax returns, bank statements and income.

Once all the information is collected the lender/bank will make a decision as to whether they will approve the short sale.  Upon approval, all foreclosure proceedings will be stayed and the lender/bank will allow the homeowner to obtain a purchaser if one has not already been obtained. 

If the approval is obtained sufficiently in advance of a scheduled auction sale many times the lender/bank will adjourn or forebear from scheduling an auction sale and allow the property to be conveyed under the approved short sale.

If the property is conveyed pursuant to a short sale agreement the homeowner will convey their deed to the buyer as with any conventional sale. No foreclosure sale takes place and no foreclosure will show on their credit report.

If the property is foreclosed upon, without an agreement with the lender, the foreclosure will show on the credit report and it will be between 3 and 7 years before the homeowner will be able to mortgage another property. Conversely, with a short sale the homeowner will be able to mortgage another property in as little as 2 years.