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Advantages of a Short Sale

The main benefit of a short sale is that you get out from under your mortgage without liability for the amount of the loan that is left unpaid. You also won’t have a foreclosure or a bankruptcy on your credit record. The general thinking is that your credit won’t suffer as much as it would were you to let the foreclosure proceed or file for bankruptcy to get out from under any liability you might incur in the course of the foreclosure.

Your credit rating will take a hit regardless of which option you choose—short sale, foreclosure, or bankruptcy. But a short sale might mean that you could buy a big-ticket item on credit a year or two earlier than you otherwise would, or get a credit card at 15% instead of 19% interest. You will need to balance the prospect of improved credit against your opportunity to stay in your house longer and save money, as described below (and in Ch. 9). Only you can decide which path suits you better.