Author Ivy Truong// Editor Karim Mourad, Family, Real Estate

Short Sales And Disclosures. What the differences?

For the average consumer, the concepts of ‘short sales’ and foreclosures are similar but nonetheless vague. The terms are often used interchangeably, but they’re quite different, with varying timelines and financial impact on the homeowner and buyer. In this week’s post, I’m writing an overview about the differences between these terms. If you ever consider pursuing a short sale or foreclosure, you will need to know what that means and what to expect.

As unfortunate as it can be when homeowners fall behind on mortgage payments and face the possibility of losing their homes, short sales and foreclosures provide them options for moving on financially.


Definition: A short sale comes into play when a homeowner needs to sell their home, but the home is worth less than the remaining balance that they owe. The lender can allow the homeowner to sell the home for less than the amount owed, freeing the homeowner from the financial predicament.

SELRES_1fae51d6-270a-47af-bcf7-f930a6042645GOOD: SELRES_1fae51d6-270a-47af-bcf7-f930a6042645Short sale properties usually in good condition because in most cases homeowners still live in the property


  • Short sales typically take longer to complete (three to four months) and many of the closing and repair costs are shifted from the seller to the lender.
  • In short sales transactions, you deal with multiple parties (the bank holding first position in mortgage and possible other banks holding 2nd or 3rd mortgage).
  • You may deal with emotional homeowners who soon lose their home and money.
  • The biggest problem with short sales is potential liens. Homeowner may owe more than one mortgage, HOA due, unpaid utility fees. HOA liens can lead to a foreclosure before you ever close on a deal

The bottom line is that with short sales the property is likely in good condition, but you commit to a process that takes a lot of time without any assurance of results. You will need to do your homework by checking public records to find out all mortgages and liens that come with the house before title is clear and in your name.


Definition: A foreclosure occurs when a homeowner can no longer make payments on their home, so the bank begins the process of repossessing it. A foreclosure typically moves much faster than a short sale and is more financially damaging to the homeowner. After foreclosure the bank can sell the home in a foreclosure auction.


  • This is a less complex transaction; you only deal with just one party (often the bank selling the home).
  • Foreclosure transactions generally move faster compared to short sales because the bank is a motivated and unemotional seller.


  • This is a riskier proposition. Foreclosed homes are sold as-is and unseen without inspection or warranty.
  • The houses are in bad condition since most foreclosed homes have been vacant and neglected for a long time.

Generally, buying short sales and foreclosures are both risky, but could well worth the risk because it may be your golden opportunity to buy a property below market price. What do you need if you are considering this option?

  • Patience, patience, patience. The process will involve a lot of waiting.
  • Knowledge, by doing your homework through research and studying the property as well as the process.
  • Professional help is crucial. A good real estate agent who understands what you want, has great knowledge about short sales and foreclosures, and can negotiate for you.

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