Identical situations ---- well, almost.
Two property owners have identical home floor plans, different elevations, different upgrades. Both paid nearly $1M for their respective homes when they bought them brand new from the developer 3 years ago.
The developer had sold for $680K or 30% less, its last property that the same floor plan just last year. Other homes in the community have also fallen in market value because they were adversely affected by recent sales of short sales and foreclosures.
Both these property owners need/want to sell now. Both don't want to do a short sale because they want to protect their credit.
Seller A is a young couple. This is their first home. They may need to relocate, and have to sell. They are aware of the market change, what their home is worth today. So they decided to take the hit and accepted offer for approximately $750K (before selling expenses). So they are losing what they put into the house, and then have to shell out additional funds for expenses.
Seller B is an investor with other properties. This is one of their homes. But they vacated the home, moved to another. Their initial list price a year ago was for nearly what they paid for it. Over the course of the next few months, they have re-listed and reduced the price trying to catch up to similar and larger homes taht sold for less in the same neighborhood. Their current list is higher that Seller A's even though Seller B's property has fewer and less expensive upgrades.
Seller B finally receives an offer, but refuses to accept anything less than list price. And so it sits....and sits....and sits.
In the meantime, they make monthly payments of nearly $6k.
Their insurance company may question their rate because the home is vacated, and as such, unprotected.
There is no correct answer to the question on whether or not it would have been better for them to do a short sale, take a hit on their credit score,. Either way, they would have lost 20% of market value.
But what is their next objective?
By doing a short sale, they would lose what they put into the house. And they will see a significant drop in their credit score which they can repair in 2 years or less and enable them to buy another property after that time. Neither homeowner may qualify to buy another property during this time or "repair".
By not doing a short sale, they not only lost market value, but also more $$ out of their pocket. BUT, if they have liquid assets and can qualify to buy another home without waiting for 2 years This may also present them with the opportunity as move-up buyers.