What Are My Options If I’m In Foreclosure

Facing foreclosure on your home can be a distressing and overwhelming experience. Many homeowners find themselves unsure about their options and the differences between various foreclosure-related terms. In this blog post, we will shed light on the difference between a short sale and a foreclosure, providing you with valuable insights to help you make informed decisions during this challenging time.

Short Sale vs. Foreclosure: Understanding the Basics.

Nicole Espinosa, a real estate & short sale expert, AKA “The Short Sale Queen,” has addressed one of the most common questions about foreclosure: what is the difference between a short sale and a foreclosure? Both options involve the lender, but there are significant distinctions between the two processes.

  1. What is a Short Sale

A short sale occurs when a homeowner is behind on mortgage payments and decides to sell the home for less than the outstanding loan balance. The lender, in this case, agrees to accept less than what is owed on the mortgage. Despite being in foreclosure or facing foreclosure proceedings, the homeowner still retains ownership of the property during the short sale process.

Key Points:

  • The homeowner is in control of the selling process and can choose the buyer.
  • The lender’s approval is necessary for the short sale to proceed.
  • The homeowner has the right to reject an offer if the lender does not agree to the terms.
  1. What is a Foreclosure

Foreclosure is the process through which a lender seizes and sells the property after a homeowner fails to make mortgage payments, leading to the loss of ownership rights. Once the foreclosure is complete, the bank becomes the seller, and the property is classified as “Real Estate Owned” (REO).

Key Points:

  • The homeowner loses ownership of the property after foreclosure is finalized.
  • The bank or lender controls the selling process and determines the terms of the sale.
  • Foreclosure properties may be sold at auction or listed on the market as REOs.

Short Sale Process Explained

During a short sale, the homeowner works with the lender to negotiate the terms of the sale. Contrary to popular belief, the bank does not dictate the buyer; it only reviews and approves the offer presented by the homeowner. The bank’s primary role is to determine the acceptable price and minimum net proceeds.

The short sale process involves the following steps:

  1. The homeowner initiates the short sale process with the lender’s approval.
  2. The homeowner lists the property for sale and finds a potential buyer.
  3. The homeowner submits the buyer’s offer to the bank for review and approval.
  4. The bank decides whether to accept or reject the offer based on its requirements.
  5. If the bank accepts the offer, the short sale proceeds, and the homeowner avoids foreclosure.

Foreclosure Process Explained

In contrast, the foreclosure process leads to the bank taking ownership of the property and selling it to recover its losses. After foreclosure, the bank conducts due diligence to assess the occupancy status of the property. If the property is vacant, the bank proceeds with an open title search to resolve any issues before listing it for sale.

The foreclosure process typically includes the following steps:

  1. The homeowner defaults on mortgage payments, triggering foreclosure proceedings.
  2. The bank initiates the foreclosure process and hires a foreclosure attorney or substitute trustee.
  3. If the house is occupied, the bank may negotiate a “cash for keys” arrangement with the homeowner to avoid eviction.
  4. If the property is vacant, the bank conducts a title search to clear any liens and lawsuits.
  5. The bank hires agents to perform broker price opinions (BPOs) to determine the property’s value.
  6. The bank lists the property for sale as an REO and reduces the price periodically until it sells.


When facing foreclosure, it’s essential to understand your options and the potential consequences of each path. A short sale allows homeowners to sell their property for less than what is owed, with the lender’s approval, while still maintaining ownership rights during the process. On the other hand, foreclosure results in the bank taking ownership and selling the property to recover its losses.

Seeking professional advice from a real estate expert or foreclosure specialist can be beneficial during this challenging time. Remember that each situation is unique, and finding the best solution for your particular case is crucial. Always stay informed about the options available to you and explore avenues that can help you avoid foreclosure and secure your financial future.

If you’re interested in learning more about short sales and pre-foreclosures, Nicole’s book “Short Sales Uncensored” on Amazon can be a valuable resource to guide you through the process. Additionally, you can join the Facebook group, the only short sale group worth being a part of, to ask questions and gain insights from experienced professionals. Always feel free to reach out to us if you have any more questions or if we can help in any way.


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Foreclosure vs Short Sale
Options if I am in Foreclosure

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