Short Sale

You are in control of the sale, not the bank.
It allows the homeowner more time to find a new place to live instead of facing eviction.
Contrary to popular belief, you can be current on your payments and still effectively complete a short sale.
Typically less damaging to your credit report than a foreclosure because you make an effort to work it out with the bank.
If your payments are in arrears yet a short sale is granted by your lender, you may qualify to buy another home with a Fannie-Mae backed mortgage within two years, regardless of whether the home is your primary residence.
Judgments are often negotiated between the seller and the short sale bank. In some cases, such as in California, if the home is your personal residence and was financed through purchase money, there is no deficiency judgment.

Foreclosure

May prevent the homeowner from obtaining another home loan for 3 years.
With certain restrictions, you may be able to buy another home in 3 years if the home was your primary residence.
May also face tax liability. If the lender chooses not to record the deficiency judgment they have the option to write off the loan and issue 1099 which the homeowner will pay taxes on.
In California, a deficiency judgment may be filed regarding a hard-money loan, and the sale takes place as a trustee’s sale.

To learn further if a foreclosure or short sale is right for you, consult with Cesi Pagano and Associates directly.