Shortsales vs Foreclosures
What you need to know. We can help you navigate the different processes.
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Understanding Your Options
Short Sale
A Short Sale transaction occurs when mortgage lenders allow the borrower to sell the house for less than the amount owed on the mortgage. This is a voluntary process that requires lender approval.
The term "short sale" does not appear in a credit report. Instead, the account will be reported as "settled" or "paid in full for less than the full balance."
After a short sale, you may be able to purchase a home as soon as 12 months depending on the lender and loan type.
- ✓Less damage to credit score
- ✓Voluntary process — you maintain some control
- ✓Can buy again in as little as 12 months
- ✓Avoids public foreclosure proceedings
Foreclosure
The foreclosure process occurs when lenders repossess the house, often against an owner's will. This is an involuntary process initiated by the lender after missed payments.
A Foreclosure will stay on your credit report for seven years and can significantly impact your ability to obtain future financing.
After a foreclosure, you typically must wait 3–7 years before qualifying for a conventional mortgage, depending on the loan type.
- ✗Stays on credit report for 7 years
- ✗Involuntary — lender takes control
- ✗Must wait 3–7 years to buy again
- ✗Public record — affects future employment
Credit Impact & Timeline to Repurchase
| Factor | Short Sale | Foreclosure |
|---|---|---|
| Credit Report Entry | "Settled" or "Paid in Full for Less" | "Foreclosure" — public record |
| Credit Report Duration | 2–4 years impact | 7 years on record |
| Credit Score Drop | 50–150 points (varies) | 100–150+ points |
| Time to Buy Again (FHA) | As little as 12 months | 3 years minimum |
| Time to Buy Again (Conventional) | 2–4 years | 7 years |
| Control Over Process | Seller retains some control | Lender controls process |
| Deficiency Judgment Risk | Negotiable with lender | More likely |
Short Sale Questions
What is a short sale?
A short sale occurs when a homeowner sells their property for less than the outstanding mortgage balance, with the lender's approval. It's an alternative to foreclosure.
Does a short sale hurt your credit?
A short sale does impact your credit, but typically less severely than a foreclosure. The account is reported as "settled" rather than "foreclosed," and the impact diminishes over time.
What is needed to make an offer?
Buyers need a pre-approval letter, proof of funds for down payment, and a competitive offer. The lender must also approve the sale price, which can extend the timeline.
What is the expected time frame to close?
Short sales typically take 3–6 months to close due to the lender approval process. This is longer than a traditional sale but shorter than a full foreclosure proceeding.
Why are short sales so difficult?
Short sales require approval from the lender, which adds complexity and time. Multiple parties must agree on terms, and the process requires extensive documentation.
Why short sales are bad for buyers?
Buyers face uncertainty around timelines and lender approval. The property is often sold "as-is," and the extended process can be frustrating. However, short sales can offer below-market prices.
How do you find out about short sales?
Short sale listings are typically marked in the MLS. Working with an experienced agent like Tiffany Simone gives you access to both listed and off-market short sale opportunities.
How long can a house stay in a short sale?
A home can remain in short sale status for months or even years if the lender does not approve the sale or if negotiations stall. Having an experienced agent helps expedite the process.
Tiffany Answers Short Sale Questions
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