A foreclosure has a much higher impact on your abilitity to purchase a home in the future and usually a higher impact on your credit score than if you “settlle” with the lender(s) by completing a Short Sale. While both affect your credit, most experts agree that when done correctly the damage is substantially less by completing a short sale than if you were to allow the bank to foreclose on your home. Lenders view a “short sale” as a more “responsible” to handle hardship than a foreclosure.
A short sale may affect more than your credit score. There could be tax consequenses and other legal ramifications involved in completing a short sale depending on the terms agreed to by the borrower (seller) and the bank. For this reason, I highly recommend that all my clients consult with an attorney and their tax professional. I have lawyers and tax professional references available to do a consult and review your short-sale approval letter for a moderate fee if you don't have your own. Let my team of experts put your mind as ease!