How Does a Short Sale Differ from a Foreclosure?
Foreclosure vs. Short Sale - A Clear Explanation
Foreclosure is the term used to describe the legal process by which a lien holder (most often a bank) is able to take back (foreclose on) a piece of real estate that was used to secure a debt. The foreclosure process can be somewhat complicated and is explained in detail here. The end result of a foreclosure is that the bank or other investor purchases the property through a foreclosure auction at which point any further liens on the property are relinquished.
A short sale is the term used to describe the situation when a home is sold for less than what is owed to the bank. The bank must agree to the terms and price of the home. The bank will typically lose money through a short sale unless they are able to recover the difference from the sellers at a later date or at closing.
Many of our short sale sellers are currently going through the foreclosure process concurrently with the shortsale process. Banks will typically (but not always) suspend the foreclosure proceedings if they believe that it will be in the bank's best interest to approve a short sale instead.