Why shouldn't I just walk away and let the lender foreclose?
This should be your last resort for the following reasons:
A foreclosure on your credit is the worst thing that could happen. Your credit will be impaired by this blemish for up to 7 years and most likely have an effect on your ability to obtain credit in the future, buy/rent a home, open a checking account and/or seek employment.
The nightmare doesn't end at the foreclosure sale. The lender could pursue a "Deficiency Judgment" after the foreclosure sale. Simply put, a Deficiency Judgment is the difference between what the property sold for and what was owed on the property at time of sale plus approved lender expenses relating to the foreclosure sale (ie. Attorney fees, late fees, accrued interest and such.). After obtaining a Deficiency Judgment, the lender could turn the judgment over to a collection company and pursue the deficiency in court.
A short sale will generally only effect your credit for up to three years, if not less. In addition, if properly negotiated by an experienced short sale negotiator, you will not need to worry about the lender trying to collect a Deficiency Judgment from you after the sale is closed. The problem will be solved so you can go on with your life.
Should you have any questions regarding how the legal or tax consequences will affect your personal situation, we recommend that you consult with an attorney or tax/financial advisor that is familiar with your personal details.
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