When Does a Short Sale Make Sense?
A short sale is where you sale your house for less than you actually owe. This process has to be approved by your bank. There are a great number of issues with this process. The main problem is while getting approved for a short sale the bank will require you to stop making your mortgage payments. The other issue is there really is not much difference between a short sale and a foreclosure on your credit report. To make matters worse while getting approved for the short sale and after you have quit making your payments the bank can deny your request.
John Ulzheimer has discussed how short sales affect your credit and how there is not much difference between the two according to Fair Isaac.