Which statement best distinguishes foreclosure from a short sale?

• A. Short sale is lender seizing property to recover debt; foreclosure is when the property is sold for less than the debt with lender consent.
• B. Foreclosure is lender seizing property to recover debt; short sale occurs when property is sold for less than the debt with lender consent.
• C. Foreclosure and short sale are the same process with different names.
• D. Short sale requires no lender consent.

Answer: (B)

Foreclosure is the lender’s legal action to take the property after the borrower defaults, then sell it to recover the loan balance. A short sale, on the other hand, is when the borrower negotiates with the lender to sell the home for less than the outstanding debt, with the lender’s consent, so the loan is satisfied by the sale proceeds. The crucial distinction is who initiates and approves the resolution: foreclosure is the lender seizing the property, while a short sale is a lender-approved sale at a reduced price. This is why the described statement is the best: it correctly states foreclosure as seizure and notes that a short sale occurs with the lender’s consent and involves selling for less than the debt. Short sales do require lender approval, and they are not the same as foreclosure.