Short Sales Are on the Rise. Here's What That Means If You're Behind on Your Mortgage
Short Sales Are on the Rise. Here's What That Means If You're Behind on Your Mortgage
If you're behind on your mortgage, or you can see it coming, you've probably heard the terms "short sale" and "foreclosure" thrown around like they're interchangeable. They're not, and lately, more sellers nationwide are ending up in a short sale than you might expect. Here's what's actually happening, and how the two compare.
What's changing, nationally
According to a Realtor.com report, short sale transactions were up 4% from 2023 to 2024, nearly 10% the year after that, and about 16% year over year in the first quarter of 2026. That's a national trend and it's worth understanding because it means more homeowners are working through this process and more information exists about how to do it well.
Short sales are still a small portion of the overall market. This isn't the new normal. It's a shift worth paying attention to, not a wave that's already happened.
What a short sale actually is
A short sale means your lender agrees to let your home sell for less than what you owe, and forgives or defers the difference. It's not a shortcut, and it's not fast.
Short sales aren't fast sales. Once we receive an offer, the lender could take 30 to 120 days or longer to approve it. From listing through closing, I'd prepare for roughly three to six months, although every lender and situation is different.
A couple of things worth knowing going in:
You'll want a written deficiency waiver from your lender, so a debt collector can't come back later for the difference.
Forgiven debt can be considered taxable income by the IRS, so that's a conversation for your tax professional too.
What foreclosure actually is
Foreclosure is when the lender forces the sale of the home to recover what's owed. Illinois requires lenders to go through the court system before a foreclosure is finalized, and that process takes time.
Here's the honest tradeoff. Foreclosure lets you stay in the home longer before it's final, an average of nearly 600 days according to that same report. That's a real reason people choose it, or end up there by not acting sooner. A short sale, on the other hand, requires you to act before the bank forces the decision for you.
There's also a deed-in-lieu of foreclosure option, where you voluntarily hand the title to your lender in exchange for the rest of your mortgage debt being cancelled. It's a way to leave without going through the full foreclosure process.
How they compare
Neither option is automatically the "right" one. It depends on your timeline, your finances, and what matters most to you. A few honest differences worth knowing:
Homes tend to fetch roughly 9% more of their value as a short sale than as a foreclosure
Owners who go through foreclosure typically face a longer wait before they can qualify for a mortgage again down the road
Foreclosure gives you more time in the home before it's final
A short sale requires earlier action and more paperwork, but can protect more of your equity and your credit standing
Even with the advantages of a short sale, foreclosures still outpace them by more than two to one nationally. There's no wrong choice here, just different tradeoffs depending on your situation.
You don't have to figure this out alone
A Real Estate Agent can help you understand your options and connect you with people who've helped others through this, attorneys, housing counselors, short-sale negotiators. HUD-certified housing counselors also offer free or low-cost guidance. Find a counselor at 800-569-4287.
One more thing, because it matters. If anyone asks you for money upfront to "guarantee" they can stop your foreclosure, or asks for you to sign over your deed, or pressures you to sell immediately, that's a scam. Real help never starts with a payment from you.
FAQ
Is a short sale always better than foreclosure?
Not necessarily. Foreclosure lets you stay in the home longer before it's final. A short sale requires earlier action but tends to protect more equity and do less damage to your credit long term. It depends on your situation.
How long does a short sale actually take?
Plan for roughly three to six months from listing to closing. Lender approval on an offer alone can take 30 to 120 days or longer.
Do I have to pay taxes on forgiven mortgage debt?
Possibly. The IRS can consider cancelled debt taxable income, so it's worth a conversation with your tax professional before you move forward.
If you're weighing your options and you're not sure which way to go, reach out. Let's connect or send me a message anytime or or call/text me at 815-693-5757. Our conversation stays between us, and there's no judgment in it.
If you want the full breakdown of what to do the moment you fall behind, things like forbearance, loan modification, and repayment plans, I've already written about that here: Behind on Your Mortgage in Illinois? Read This Before You Panic.
I work with homeowners across Grundy, Will, Kendall, and LaSalle Counties, and I'd rather help you understand your options early than watch you run out of time to use them.
– Christy Schmaedeke 🐾
