It is getting easier and easier to recover after the short sale - with the new loan programs available.
Hope this helps,
Beachfront Realty, Inc.
I would recommend taking a loan out for the difference and paying off the mortgage instead of doing a short sale. Its better for your credit and paying back debt is the "right thing to do".
If one has the ability, paying back what you owe is the best thing to do.
I would have to disagree with John's answer to your question.
By the nature of the term, "short sale" the lender is agreeing accept less than the total payoff amount. Anytime there is a settled payoff this reflects poorly on an individual's credit. Also I can't think of any situation where a lender would agree to a short sale unless the borrower is significantly delinquent. And as we all know, late mortgage payments have a serious negative impact on credit.
The short sales I have been involved with have all been on the buyers side, so I haven't had access to the seller's credit. However in all these cases the seller and the seller's realtor both are aware that unless the buyer is able to secure financing, the seller will lose their home to foreclosure.
Hope this helps.