The Difference Between Foreclosures & Short Sales


Your debt is overbearing and you can’t keep up with your mortgage payments. There are a few possible paths you could face next, including foreclosure or a short sale. Both will help pay back creditors and lenders, but they’re different routes and don’t come without their own problems.


If you miss a certain number of mortgage payments, lenders might decide to sell your home in order to recover some of the money you owe them. This might seem unfair, but the reality is your house is collateral for the mortgage, so the bank is legally allowed to seize it and sell it if you default on your loan.

The combination of missing several mortgage payments and losing your home to foreclosure can drop your credit score by hundreds of points. If possible, a slightly better alternative is a short sale.

Short Sale

Short sales happen when you get permission from your bank or lenders to sell your home for less than the total amount you owe them. While not a perfect solution, they do allow you to keep some control over your financial situation, and the hit against your credit score isn’t as severe as it would be with a foreclosure.

It can be challenging to get approval to sell your home for a price short of the loan amount. Banks basically have to have the mindset that it’s better to get something than nothing, but if they do agree to it, it can benefit you in some ways.

A short sale can help you:

  • Avoid foreclosure and the rush and social repercussions that come along with it
  • Delay a potential bankruptcy and give you time to sort out finances
  • Release you from the financial obligations of your home
  • Salvage a credit score higher than you’d get with a foreclosure (Though still not great)

The Negative Fall-Out From Foreclosures & Short Sales

If your home is sold short of the loan amount, there will still be a deficiency in the balance you owe. This means that lenders can still hound you for money and take measures such as wage garnishment.

If the lender decides to cancel the amount you owe, then you could end up with a huge tax liability because the amount will be considered taxable income. If your deficiency balance is large, the best option to take will be a Chapter 7 or Chapter 13 bankruptcy.

No matter what path you hope to take to get out of debt, you’ll need the help of an experienced attorney to take the next step. 

Schedule Your Free Initial Consultation With A Cherry Hill Foreclosure & Short Sale Lawyer

The Law Office of Joel R. Spivack is open weekdays from 8 a.m. to 5 p.m. and offers virtual or in-person appointments. Call 856-488-1200 today to get your initial consultation with a Cherry Hill foreclosure and short sale attorney.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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