The number one reason a distressed homeowner should proceed with a short sale is to protect their ability to obtain financing in the future. Most short sales result in a settlement status on their credit report as opposed to foreclosure. Fannie Mae and Freddie Mac guidelines are much more favorable to borrowers with a short sale on their credit report and typically allow a borrower to obtain financing for a new home within a couple of years. In sharp contrast, a foreclosure remains on a credit report for seven years, making it very difficult to finance another house, a car, open a new business, or even qualify for credit cards. Any loans received will most likely bear very high-interest rates.
Bottom line: the end result of a short sale is minor when compared to the consequences of a foreclosure. A foreclosure becomes public record, which is searchable by anyone and can never be removed.
A Short Sale offers a fresh start, eliminating debt while minimizing damage to credit and avoiding eviction proceedings.