In a short sale, a lender works with you to sell the property for less than is owed.
People think that lenders are willing to execute short sales and the process is simple. This is not true. Lenders do not want short sales to become popular, otherwise they lose money as the number of short sales increases. Each lender has its own rules and a custom property recovery system. There are no standard short sale recovery systems. Individuals executing short sales might experience either a simple, or a very difficult process.
In the case of foreclosure, the bank takes legal action to recover its interest in the property.
The process is set by state statute and gives the borrower some rights. Usually, individuals in foreclosure never research their rights and then miss opportunities that help them recover cash. Foreclosing lenders do not volunteer this information which is typically buried in the fine print of the original mortgage papers. Recently, TrueLife Real Estate helped an individual in foreclosure secure $50,000, instead of walking away from the property with nothing. This is realtor representation at the highest level, and most realtors believe this is impossible.