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Foreclosure involves the lender taking ownership of the property due to non-payment of the mortgage, which can severely damage a homeowner's credit for up to 7 years. A short sale allows the homeowner to sell their home for less than what is owed on the mortgage with lender approval, avoiding foreclosure but still negatively impacting credit for 2 years. Both options result in the homeowner losing their home but a short sale allows the homeowner to leave on better terms and have less long-term damage to their credit.
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