Short Sale vs. Foreclosure in Maryland | Key Differences
- Kat Moore — The German Realtor®
- Oct 10
- 3 min read
Learn the difference between short sales and foreclosures in Maryland. Discover how each impacts homeowners, credit, and the selling process.
When money gets tight and mortgage payments become overwhelming, two terms often pop up: short sale and foreclosure. Both mean a homeowner is in financial trouble, but they’re very different paths with very different outcomes.
So let’s break it down—without the legal jargon headache.
🏠 What Is a Short Sale?
A short sale happens when a homeowner sells their house for less than what they owe on the mortgage, and the lender agrees to accept that amount as payment.
Example: You owe $300,000 on your mortgage, but the best offer you can get is $270,000. If your lender agrees, the sale goes through, and the bank takes the $270,000 to settle the loan.
💡 Key Points about Short Sales:
They require lender approval before closing.
The home is sold on the open market (not at auction).
The seller avoids foreclosure and may have less damage to their credit.
They can take time (because banks move slooowly ⏳).
Think of a short sale as negotiating with your lender to end the relationship on “okay” terms, rather than going through a messy breakup.
🏚 What Is Foreclosure?
Foreclosure is when a homeowner can’t pay their mortgage, and the lender takes legal action to repossess and sell the property. In Maryland, this is a court-supervised process that ends in a public auction.
💡 Key Points about Foreclosure:
It’s more damaging to your credit than a short sale.
The bank controls the sale, not the homeowner.
It can lead to losing the home faster, with fewer options.
Once completed, the sale is final—there’s no going back.
If a short sale is the “conscious uncoupling” of real estate, foreclosure is the sudden divorce no one wanted.
⚖️ Short Sale vs. Foreclosure: Side-by-Side
Feature | Short Sale | Foreclosure |
Who controls the sale? | Homeowner (with lender approval) | Lender/court |
Sale price | Often less than owed | Auction—highest bidder |
Credit impact | Negative, but usually less severe | Major negative impact |
Timeline | Longer, requires bank approval | Faster, once filed in court |
Moving out | Seller moves after closing | Homeowner must leave after sale ratified |
👩💼 Why a Short Sale Might Be Better
For homeowners who qualify, a short sale often does less long-term damage than a foreclosure. It allows you to stay involved in the process, sell your home with dignity, and potentially recover financially more quickly.
That said, short sales aren’t easy. They require paperwork and patience.
⚖️ Important Maryland Note:In Maryland, Realtors® are not allowed to negotiate the short sale terms directly with the lender. Negotiating debt is considered a legal activity. Only a licensed attorney or debt negotiator can handle that part.
✅ What your Realtor can do: market your home, price it correctly, guide you through the contract process, and connect you with a qualified attorney to manage the lender negotiations.
In other words: the attorney handles the lender, I handle the sale — together, we help you get to the finish line.
📊 Maryland Snapshot
In Maryland, both short sales and foreclosures appear in the housing market, in some counties more than others. But lenders here are required to offer homeowners chances for mediation and alternatives before moving forward with foreclosure.
❓ FAQs
“Does a short sale always wipe out the entire debt?”: Not always. Sometimes lenders forgive the balance, sometimes they may still pursue it. This depends on the lender and the agreement.
“Can I buy another house right after a short sale or foreclosure?”: Usually not immediately. Mortgage guidelines often require waiting periods—often shorter after a short sale than foreclosure.
“As a buyer, should I consider short sales or foreclosures?”: Yes, but be ready for delays (short sales) or as-is conditions (foreclosures). They can be opportunities, but not always easy wins.
✅ Bottom Line
Both short sales and foreclosures are tough situations, but they’re not the same. A short sale gives the homeowner more control and usually a softer landing. Foreclosure, while sometimes unavoidable, comes with harsher consequences.
👉 If you’re facing this situation in Anne Arundel, Howard, Prince George’s County or Southern Maryland, you don’t have to figure it out alone. Let’s talk about your options and find the best path forward.
Kat Moore | Realtor | Advisor
Samson Properties
📞 410-414-5967 (cell), 443-975-7555 (office)
The Kat Walk To Homeownership
Disclaimer
This blog post is provided for general informational purposes only and reflects my perspective as a licensed real estate agent. It does not constitute legal, tax, or financial advice. Laws and regulations can change, and individual circumstances vary. Please consult a licensed tax professional, attorney, or other qualified advisor for advice specific to your situation.
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