Short Sale: The lender agrees to sell the property for less than the amount owned on the mortgage. The process may take a long time because the bank has to agree to the amount offered by the buyer.
Foreclosure: The bank takes ownership of the property, which terminates the owner’s rights to the property due to default in payments. The process is usually faster than a short sale because the bank owns the property. Usually on foreclosures, the property needs repairs.
Photo courtesy of Taber Andrew Bain (Flickr)