What are the differences between a foreclosure and a short sale?

Foreclosure and short sale are two options for homeowners who owe more money than their home is worth. In Wisconsin, foreclosure law dictates the rights of the mortgage lender and borrower in each option. A foreclosure occurs when a borrower defaults on their loan and the lender repossesses the property. The lender then sells the property in an attempt to recoup the remaining debt owed. Foreclosure can remain on a borrower’s record for seven years. A short sale, on the other hand, is a negotiation between a borrower and lender in which the borrower goes on to sell their property for less than the amount owed on the loan in an attempt to have the debt forgiven. The lender must agree to this arrangement in advance, however, and the borrower is still responsible for any deficiency between what is owed and what is actually received. The biggest difference between foreclosure and a short sale is the negative credit consequences. Foreclosure stays on a credit report for seven years and can significantly lower a credit score. A short sale will not have as significant of an impact as a foreclosure but will still remain on the credit report for up to seven years.

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What are the differences between a foreclosure and a short sale?

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