I have been doing short sales for over 4 years and my own experience is that it all depends on what bank is doing the short sale. When the approval letter is issued some banks state clearly that they "reserve the right to pursue the owner for the difference" while others will also indicate that this letter releases the owner from any further obligation. So for these two cases things are cleared. The problem is that some banks don't say one thing or the other, so it leaves the door open. You could call your bank and ask them what is their policy, most of them will tell you what to expect. With all said, I think it is still better to do a short sale than to foreclose on the property. And by the way, the person handling the short sale can also NEGOTIATE with your bank and let them know that you will only close if they put in writing that they will not pursue the difference. REMEMBER: In real estate EVERYTHING IS NEGOTIABLE and as the seller you still have the last word!