Question: Can you explain the difference between a short sale and a foreclosure? Answer: In basic terms, a "foreclosure" is forced sale that results from the failure of the borrower to repay the mortgage. A "short sale" is an agreement between a borrower and a lender under which the lender accepts a loss on the loan which allows the owner to sell or refinance. A foreclosure and a short sale are alike, however, when shown on a credit report. To lenders, either event is a red flag, evidence that a loan agreement was not properly completed.