What’s the Difference Between A Short Sale and Foreclosure in Virginia


What is a short sale in Virginia? A Virginia short sale entails selling your home or property for less than your remaining balance to your mortgage lender. If you are a homeowner having trouble selling your house or condo, you may find that pursuing a short sale in Virginia could be the answer to your problems.

In this guide, you will learn all about the short sale process, its pros and cons, and how it compares to and contrasts with a foreclosure. You will read all about the laws of short sales in Virginia and how to pick the right real estate agent for your needs. Let’s get started! 

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Short Sale vs Foreclosure in Virginia

What is a short sale? The biggest difference between a short sale and a foreclosure in Virginia and elsewhere is that a short sale is voluntary while a foreclosure is an involuntary action, according to Investopedia

A foreclosure occurs when a mortgage lender seizes your property because you failed to make payments on your loan. You will find that a foreclosure is the absolute last option that a lender will take.

As such, both homeowners and lenders would prefer going the route of a short sale. Nonetheless, a homeowner will need to get the approval of a lender to take part in a short sale of their home. 

A short sale will leave the homeowner with a remaining balance on their mortgage. The homeowner will be responsible for paying the rest of this balance over time.

What Is a Short Sale in Virginia?

If you plan to sell your home in Virginia, you are probably wondering what laws govern FSBO sales. 

Let’s discuss some for sale by owner laws.

In Virginia, the average fee of a housing agent is 5%-6% of the total house sale, and here’s why a lot of owners consider selling their home themselves. If you decide FSBO is the best way to go, here are two laws you should keep in mind aside from legal advice from your real estate attorney.

Disclosure Agreement

A short sale in Virginia is a situation in which the homeowner owes more on their home than what any home buyer is willing to pay. In this case, the homeowner must ask permission from their mortgage lender to sell the home for less money than is owed on the property. 

A short sale on a home is a way for both the home borrower and the lender to avoid having to take part in a foreclosure. If a home borrower is having serious financial difficulties, selling to a buyer for less than the mortgage price could be appealing.

There are specific requirements that need to occur for a short sale to proceed. These requirements include: 

  • The homeowner has to have an eligible deprivation.
  • The buyer cannot be affiliated with the homeowner and must have purchasing power in place.
  • The buyer’s offer on the house or property needs to align with fair market pricing.
  • The mortgage lender needs to agree to the sale of the property. 

What Is a Foreclosure?

If you have fallen behind on your mortgage payments by three to six months, your mortgage lender may choose to foreclose on your property. However, they will give you a chance to get up to date on your loan and pay off the required amount.

State laws will vary on the types of notifications you would receive from your lender and the type of options you have to meet loan requirements. The bank will have a certain amount of time to sell your property. 

The majority of foreclosures occur when the homeowner has abandoned their property. However, if the residents have not abandoned the home, the lender evicts the homeowners before the foreclosure takes place and the property is sold. 

Foreclosures do not take a long time as the lender is looking to liquidate the asset as quickly as possible. These houses are often sold in a trustee sales foreclosure auction. 

Pros and Cons of a Short Sale in Virginia

There are both advantages and disadvantages to pursuing a short sale, such as with cash home buyers in Virginia Beach and other parts of the state. Some common benefits of short sale homes in this state include:

  • The seller does not have to face foreclosure and can be released from much of their mortgage loan.
  • The credit score recovery from a short sale is faster than a foreclosure.
  • A seller who pursues a short sale will gain financing approval on another home more quickly than if they faced foreclosure.

However, there are also disadvantages of a short sale, such as when you sell your house for cash, which includes:

  • Losing one’s home and its equity 
  • Your entire debt may not be erased, and you will likely have to pay the rest of it
  • If your debt is forgiven, then on your tax returns, you will still be taxed on the difference between the price of the sale and the amount you owed on your mortgage loan

Laws of a Short Sale in Virginia

The laws of a short sale in Virginia involve specific qualifications. You’ll need to be able to show that there are significant hardships in your life that are making it impossible for you to pay off your mortgage loan and requiring you to sell your home.

Another qualifying event is to ensure you sell your property in a real transaction where the other party is not related to you in any way. You cannot sell the property to a friend, family member, or close co-worker.

Lastly, you will also be required to sell the property at a fair market value. You’ll need to get permission from your lender to pursue a short sale, so be sure to ask all about the rules regarding short sales in Virginia. Your mortgage lender will provide you with the latest state laws on real estate short sales.

Working with Estate and Closing Agents

You may need to work with real estate and closing agents to complete the short sale process. To find the best real estate agent to help conclude the short sale of your home, you will need to find one who is experienced in short sales.

On that note, you will need to know what to look for in an estate agent. You will want to work with realtors who are experts in negotiating with lenders to ensure the amount the lender is willing to lose on the property fits the needs of the homeowner. Your real estate agent will also need to be honest, engaging, and motivated.

Working with an experienced real estate agent could help ensure your lender does not foreclose on your home and agrees to a short sale. Though this process can still take longer than ideal. If you want to sell your home quickly, you can consider selling to companies that buy houses in Norfolk and surrounding areas. 

Will I Still Owe the Bank After a Short Sale?

When you owe more on the mortgage loan than the amount of money you receive from selling your home, the balance left over is known as the deficiency balance. There are multiple things that banks may choose to do in terms of the deficiency balance.

You may still owe the bank your deficiency balance after the short sale. In such a case, the bank may request you pack the amount back using an unsecured note. Also, the bank may either send the remaining balance to collections or seek a court judgment.

However, a mortgage lender may also decide to forgive your debt and provide you with a waiver of deficiency.


Now that you’ve read through this guide, you understand the benefits of a short sale and why it is better than facing foreclosure. You may not have to pay back the rest of your loan if you pursue a short sale in Virginia.

Your credit rating will recover faster under a short sale, and you will be approved for financing another home more quickly than if you underwent foreclosure.

If you still need proof that a short sale is best for you when facing serious financial difficulties, then read through our case study to learn more about why this real estate strategy is best. And when you’re ready, contact us: We buy homes in Virginia.

Do you want to learn more about how to find buyers for your house in Norfolk? We can help! Give us a call or send us a message today! 866-833-5262