Short-selling VS Foreclosure

 In Real Estate Articles

With the housing market recovered from the condition it was in during the recession, you might be considering selling your current home. During your research, you might have come across a couple of options for homeowners have when they owe more than the home is currently worth. The terms “short sale” and “foreclosure” are thrown around somewhat loosely and often, that leads to confusion.

To clarify the difference between these terms as simply as possible, a short-sale is a transaction that takes place when the homeowner is interested in selling their property, but they currently owe more than the determined worth of the home, given the market condition.

For example, if the homeowner bought their home for $400,000 but they owe $425,000, they would ask the lender to settle. Though the lender would stand to lose $25,000, they can still accept the terms of the short sale and release the homeowner from their contract.

A foreclosure differs in that it is not a sale on the homeowner’s behalf. Foreclosures occur when the homeowner has fallen behind in their mortgage payments. After a number of months have passed with the steadily-climbing payment delinquency, the lender will attempt to collect on their debt by filing a default notice with the Recorder’s Office in their individual county.

The property would then be entered into pre-foreclosure, in which the homeowner has the opportunity to settle their loan or pay the remaining balance. If no arrangement is made through settling or balance payment, the property is foreclosed. From there, it is either sold at an auction or the lender becomes the new owner of the property until a new owner purchases it for the new asking price.

Selling your home can be difficult when you’ve got more debt than equity, but there are options available, especially if you seek assistance from mortgage professionals. For more on short sales and foreclosures, take a look at this article on

Let my team at Keystone Realtors® meet all your real estate needs. I have over 16 years of experience in buying and selling in the Santa Clara and San Mateo County areas, specializing in the high-end, luxury market. Visit our website at listings and information. You can contact me at 650-924-2544, or email at [email protected]