What is the exam-ready distinction?
| Official syllabus topic | Financing: Default, Foreclosure, Loss Mitigation, and Short Sales |
|---|---|
| Official PSI area | Financing |
| Published weight | 10% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Foreclosure | Short sale |
|---|---|---|
| Process | Creditor enforces the security interest after default under governing law and documents | Owner sells for less than mortgage debt with required lender or servicer approval |
| Seller | Creditor or authorized party conducts the foreclosure sale | Borrower remains the property seller before foreclosure completion |
| Lender consent | Enforcement follows the security instrument and law | Approval is essential because proceeds will not fully satisfy the debt |
| Deficiency | Depends on sale, debt, law, and procedure | Depends on approval terms, waiver, law, and remaining debt |
Decision rule
Georgia-specific distinction
Worked example
Scenario. A homeowner lists the property for $315,000 while owing $350,000 and asks the servicer to accept the net proceeds and approve the sale.
Reason it through. The owner is still selling, and the proceeds will be short of the debt, so creditor approval is required.
Answer. This is a proposed short sale, not a foreclosure sale.
Common exam traps
- Calling every distressed sale foreclosure
- Assuming short-sale approval waives deficiency
- Promising approval or timing
- Ignoring Georgia power-of-sale procedure
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A homeowner owes $280,000, lists the home for $250,000, and asks the servicer to accept the net sale proceeds as payoff. Which term fits?
- A. A foreclosure, because the owner is in default
- B. A deed in lieu, because the lender takes the property
- C. A proposed short sale that needs lender approval
- D. A completed short sale, because the listing is signed
Show answer and explanation →
Answer: C. A proposed short sale that needs lender approval
A short sale is a sale by the owner for less than the debt, and it closes only with the lender or servicer's approval. Here the owner is still the seller and approval has not yet been given. Calling every distressed sale a foreclosure misses that foreclosure is the creditor's enforcement, not a sale by the owner.
Question 2A Georgia home is secured by a security deed that contains a power of sale, and the borrower defaults. How is the home typically foreclosed?
- A. Through a court-ordered judicial sale
- B. By the borrower listing it with a broker
- C. By strict foreclosure with no public sale
- D. Through a nonjudicial sale under the deed's power
Show answer and explanation →
Answer: D. Through a nonjudicial sale under the deed's power
Georgia commonly uses nonjudicial power-of-sale foreclosure under a security deed when the power and statutory procedure are satisfied. No court action is needed for the sale itself. Picking a judicial sale is the common error for candidates who learned foreclosure from lien-theory states.
Question 3A short sale closes with the lender's approval. The approval letter says nothing about waiving the unpaid balance. Which statement is correct?
- A. Whether debt remains depends on the approval terms and law
- B. The listing broker can waive the remaining debt at closing
- C. Lender approval automatically erases any remaining debt
- D. The sale becomes a foreclosure because the debt was not paid
Show answer and explanation →
Answer: A. Whether debt remains depends on the approval terms and law
Short-sale approval lets the sale close, but whether the borrower still owes the difference depends on the approval terms, any waiver, and the law. Approval and waiver are separate questions. Assuming approval wipes out the deficiency is the trap, and a licensee should never promise that result.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
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Return to the complete exam-concept library or the Financing hub.