A short sale will enable the seller to purchase a home about 2 years after a short sale completion while a foreclosure will make you wait 5 years. In addition, short sales are better for the lender and it will keep the house occupied, with water and electricity still on and also keep the lawn mowed. Plus the bank will lose less money through a short sale.
No Foreclosure - foreclosures can be a hard and stressful process for a family.
Being Proactive - facing a foreclosure head on will help give you some control over the process.
Start Newer, Faster - minimizing damage to your credit can help you and your family get back on your feet faster.
May not owe anything after the short sale - you can try asking the bank to cancel your debt altogether. It does happen, but not all the time. Primary residences are usually treated more favorably by the lenders.
There is still damage to your credit - when a short sale is done, it is still documented on your credit but won't have the same impact as a foreclosure for most creditors.
Tax Consequences - there may be tax consequences if the bank forgives the debit and will issue a 1099 to the IRS for the amount of debt forgiven.
Bank could demand payment for their loss - the bank doesn't have to forgive the debt. They are able to ask you to pay them back for the difference on the sale and what is owed, but you will need to agree to this.
There are no guarantees in a short sale - whether the bank will approve the sale or forgive your debt, but short sales offer a better alternative to minimize the downside of facing a foreclosure.
Disclaimer -There can be legal and tax consequences. You may want to consult with an attorney or tax specialist before attempting a short sale. A real estate agent cannot give you legal or tax advice.