Know that sellers will take a bigger hit on their credit report by going through foreclosure than going thru a Short Sale. Of course paying you mortgage with a few late payments and modifying you loan is the best course of action, however that topic is for a different blog.  FICO score may sway towards the following:

Foreclosure
A hit of 200 to 300 points may occur within the 3 different credit bureaus. This means if a seller's FICO score before foreclosure was 720, it could dip lower than 300.  The seller has to also consider the initial dings from the lates caused prior to the end of the foreclosure.

Short Sale
The affect of a short sale on a seller's credit report is much less damaging. The ding on credit will show up as paid in full, some sort redemption status, or a few other different ways.  But the result in the loss is about 60 to 140 points. This means a short sale with a previous FICO of 720 will see it fall to 500 to 600.  However, with a true Credit Restoration you may be able to recover within months of closing your short sale.

Estimated Waiting Period Before Buying Another Home

Foreclosure
Now when the seller now becomes a buyer it will take about about 60 months before a lender will offer a rate that you may consider.  Of course at a purchase price of half of what you may have bought prior to this.  But now with the constant daily guideline changes the lending industry is experiencing rates may not be economical for the buyer.  Moreover, with the new restrictions of the guidelines the cure time and consequences may be worse.

"The presence of a foreclosure on your credit report probably will make it extremely difficult to obtain new credit at the best rates, especially if you also have problems with other credit accounts.  A foreclosure remains on your credit report seven years, so it will have a long-term effect on our creditworthiness."Experian - Credit Bureau

Short Sale
The good news for short sale sellers is that the wait is much shorter before buying another home. The same scenario as the foreclosure but in about half the time with a lot more ease in qualifying with the underwriter.

John Kim