This article discusses some great advice on telling the difference between short sale and foreclosure.

A foreclosure and a short sale have several differences. A foreclosure potentially can damage your credit and gets put on public record; you also should find out if you reside in a deficiency state or not because that will affect this significantly. Alternatively, a short sale will merely show as a tiny stain on your credit and is completely negotiable.

The key difference between short sale and foreclosure is the fact that a short sale is not nearly as devastating to a person as a foreclosure. For a quick example, one’s credit score. A foreclosure can truly hurt a person’s credit, while a short sale will only show up as a small mark on it. That is a chief difference between short sale and foreclosure.

You must understand the difference between short sale and foreclosure before you can make a decision on which way to go. A foreclosure can stay with a person for someplace between 7 and 20 years, depending on if you live in a deficiency state (if you do it is 20 years, if not it is 7 years). This has the potential to garnish your pay and a lean on your assets, along with countless other troubles. There are three concerns that can go along with a foreclosure: if you live in a deficiency state a deficiency judgment will be given to you, everything will be put on public record and it has the potential to change your credit score starting now, which is a difference between short sale and foreclosure.

With a short sale there is typically no deficiency. If a bank tells you that they are issuing one it is flexible; everything in a short sale is can be discussed. That is another key difference between short sale and foreclosure. Other differences include the fact that a short sale will not be put on public file and no foreclosure will be seen within your credit score. The bank will record the matter as either settled, paid less than owed or, in some instances, paid in full. This will appear on your credit score as a small speck, comparable to a 60 day late mark.

Many banks now require a person to have fallen behind on their mortgage payments before they can proceed with a short sale.  As soon as all is completed and the property is gone a 1099 tax document will be issued to you. This form  claims why and how much you will have gained by doing so (if the bank acquires a $100,000 deficit you have therefore received a $100,000 gain). In those cases a 1099c will be issued and, despite those documents, most of those gains go tax free and no one ever pays on the amount.

Either way it goes, foreclosure or short sale, it should only be used as a final choice. Contact and discuss the difference between short sale and foreclosure with an attorney, accountant or another knowledgeable person so that you can choose which one is right for you.

Citimortgage is one of two very prominent banks, the other being Bank of America, and it handles more loans than they have in house.  They follow specific procedures when it comes to proceeding with a Citimortgage short sale.  The first important guideline is you have to have a severe hardship.  You have to be very specific with what is happening financially that pertains to your short sale.


The best option you have is when submitting in your hardship letter write it out yourself, and make it as authentic as possible as well as expressing it as best as you can.  This approach can be used for many banks, but Citi in particular.

The second important guideline you should know is that Citi does not handle most of the decision making.  The negotiators, or the Loss Litigation Department, do not really have all that much authority to move things around or to grant extensions as you would think.

Something else people ask is, is there a formula to figure out how much the bank will approve for a short sale?  The answer is yes, but how much is owed on the property is not where it starts; it is the property’s current market value.

Many banks are willing to get within 10% of the appraisal value if under 200,000 and between 5%-8% for higher appraisals, in addition to 10% for misc. fees that can include the title and Realtors fees.  You can take the BPO, or appraisal, and deduct 15%-18% of that  to estimate how much the bank is will to take for your property  The Realtor needs to be willing to work extra hard in the beginning to come up with an offer as close to the appraisal as possible.  To do so, he/she may obtain their own BPO and pay another Realtor for a BPO that way you can present the bank with all of these documents when starting the process.

For all of these reasons and more is why having an experienced Realtor standing beside you through this process is vital.  It is that experience  that you want that will get you as close to an approved short sale as possible, especially when dealing with a Citimortgage short sale.

There is one thing that is easy to understand and that is the need for a knowledgeable Realtor to stand behind you during this process.  It will help you to understand everything and make things a lot smoother.

If you recruit the help of an inexperienced Realtor it could lead to a foreclosure instead of a short sale.  When choosing a Realtor look for detailed qualifications including a past record of approved short sales for a minimum of five families.

If the Realtor is inexperienced ask what kind of team they are working with, it is better to have one even if he/she is knowledgeable.

Put simply, the definition of a short sale is the point when the bank is willing to take less than what is  owed on the property.  The term short sale actually comes from the bank  willing to take short of the mortgage.

Other short sale definition terms include Loss Litigation Dept. and BPO.

The Loss Litigation Dept. is a department at the bank that specializes in the losses that a bank is going to take and litigate them; with litigation being able to be seen as negotiating or analyzing things and going through the  process of cutting the banks’ losses as much as possible.

This is the department that you or a Realtor  needs to get to so you can start  the short sale process because they are the decision makers on whether or not your short sale will be approved.

Another term is BPO, broker’s price opinion.  This is similar to an appraisal, but it is done by a Realtor or a Realtor’s assistant.  One more difference is the cost; it is much less than that of an appraisal.

That is why the banks use that price  to establish the current market value on the home and then to make a decision on if they are going to approve the short sale or not.

As you can see, once you know the short sale definition and the terms linked to one, the process is not as intimidating as you once thought.  Simply remain calm, understand what is going on and the definition of a short sale and things should go relatively good.

What is a short sale?  This seems to have more questions than answers.  There are two things that are easy to understand: the need for an experienced Realtor’s assistance, and to know that this is not an easy process.

To put it simply, a short sale is when the bank is willing to take less, or short, of what is owed on the mortgage; in other words a short pay off of the full mortgage.

As an model of what is a short sale is when you first purchased your property it was for $200,000, but today it is only worth $100,000; now what?  This is when a short sale comes in handy.

Once you have an offer that is reasonably close to what the value is on the house you may go to the bank and explain things in a way that would make them want to proceed with a short sale instead of a foreclosure.

Although a very serious hardship must have fallen on you, as to why this should be a short sale and nothing else.  If there is no real hardship  the short sale will not be approved.

The short sale has come into play because of the vast difference in the value of a home when bought and the current market value of it.  Only a short sale as a last resort.  Once as you have figured out what a short sale is you can begin the process of relieving a great burden from your shoulders.



Many people might be wondering “How does a short sale work?”  While there are countless variables, the one thing that is for sure is that banks are rarely interested in foreclosing.  A bank would much rather work out a strategy with a homeowner that is having difficulty, than risk a foreclosure on a property.

So, how does a short sale work?  What you need to do first is find a knowledgeable person to work with you.  There is no real benefit for you, the homeowner, to go through this alone and that is why you should invest in the help of a Realtor.   Despite the fact that you have hired a broker, you want to ensure that this person has familiarity with short sales because over two thirds of short sales are unsuccessful.

Once you have found a Realtor experienced in short sales you’re going to want to get a contract offer on your home to get things started.   A bank will not be willing to look at your short sale without having an offer on your property first.  This is merely the start on  figuring out “How does  a short sale work?”

As soon as you have a signed offer and a HUD1 then you can fill out your file, which will include pay stubs, bank statements, the previous year’s taxes along with a letter of hardship.   The file should be sent in its entirety.  You want to follow up within 24hrs to be certain that it was received and then write down the name of the person you spoke with along with asking them to make a note in the account.  Once the bank has received all of the necessarypaperwork it is now time to start negotiating which could take 30-60 days, generally speaking.

If the contract offer and amount owed are extremely different an appraiser or BPO (Brokers Price Opinion) may be asked for an opinion.  When those numbers come in, as long as they are within roughly 10% of each other, things will proceed.  If they vary more than that the negotiating process will start all over.

Many Realtors confuse a short sale for a normal residential sale, and while similar, the difference is the Realtor is now negotiating with the bank and not a homeowner.  Today’s industry average for Realtors getting short sales approved and closed is about 1 in 3, which is why finding an experienced Realtor comes in handy.