Your customer may be in one the buildings that I have done several Short sales in. I think I may even know what building you are talking about. The original builder is now selling the 3rd phase at Short sale prices. I feel your customers pain.
This is a tough decision for people. On one hand it may take 3 or 4 years or maybe even more until her value comes back to the price she paid. If she has enough down and a rental income that will cover the debt service until the value gets back to put her even , I would suggest to hang in. Credit is something to protect. In this market ,to let the unit fall behind could have a big impact in other areas of her life.
In order to have a smooth short sale she would need to fall behind on payments. There are reasons that a bank would allow a short sale to go through without missing a payment but I am sure she would not qualify.
To go to her bank and ask for a loan mod may be tough because if it isnt her primary they are not very flexible,even with the threat of her going into default.
As for the bank coming after her for the deficiency , it could happen. Most likely the bank would 1099 her for the deficiency . She could also try and get a contract on the property and hold a note for the difference to just get it sold , not a comfortable idea !!
She has a tough choice to make. Hey maybe she has the abilty to buy another at the $350,000 price and then she could be in both for an average of $473,000 per unit. ( this idea came from the Realtor in me )
If you need any help in the Short Sale process I would be glad to help