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Aside from a short sale, another way to sidestep foreclosure is a deed in lieu of foreclosure, essentially transferring ownership of your house to your mortgage lender.
The effect on your credit score is less than that of a short sale.
Contrary to popular belief, however, short sales aren't any better for your credit
score than a foreclosure. The biggest disadvantage for the buyer is time.
Short sales take much longer than a traditional home sale
because the seller's mortgage lender has to give the green light.
This process gets even longer if there are multiple mortgages and liens involved.
Even when all of the paperwork is in order and both buyer and seller
agree on a price, there is no guarantee that the lender
will approve of the short sale. Buyers need to be prepared for a long and uncertain process that
could end in disappointment. Another potential disadvantage for the buyer is higher closing costs.