Several years ago, borrowers who ended up in a short sale situation fared a bit better than those who let the bank take back the home in foreclosure. That's not true anymore, because short sales affect credit the same as a foreclosure. At least for the time being.
However, while up to June 25th, it used to be a five-year wait per Fannie Mae guidelines, the good news is Fannie Mae has changed its guidelines, so sellers can buy a new home in two years!!!
Agents who tell their sellers that a short sale will not ruin their credit or that their credit report will take a smaller hit are misinformed. I won't go so far as to say they are lying, they just don't know any better. As a real estate licensee, agents are supposed to know better and, they are not supposed to give legal advice.
But at least now agents have a real reason to say that a short sale is better. It's better because a short-sale seller can buy another home in two years, providing credit has not been further impaired during that 24-month period.
If you are considering the credit implications of a short sale, get professional advice from a real estate lawyer.