As a Realtor, I am often asked the difference between a Short Sale and a Foreclosure. After I explain the difference, I am usually met with the same response... "so, why would I care? Both hurt my credit, and I walk away from my home with NOTHING either way."
The answer is easy... If your Short Sale is negotiated properly, you can be forgiven of any balances still due. For example, if you owe $200,000 for a house and the bank forecloses and sells the house for $150,000... they can come after you for the $50,000 difference. A properly negotiated short sale, however, will usually forgive you the rest of the debt. In order to be sure your Short Sale is negotiated properly, it's always best to use a licensed Realtor and a Short Sale Consulting company.