An alternative to loan modification and why you should always do a short sale instead of walking away from your home.

Why would I want to go through a short sale when it has the same effect as a foreclosure? We get questions like this all the time as more and more consumers are often confused by what the media say and little information they can find on the Internet, while it is true that foreclosure and short sales will damage your credit report, and that you'll owe taxes in both situation, short sale however can be a better alternative.

For example, a short sale allows the homeowner to stop making payments while the house is listed. If the house is sold, the debt and obligation are relieved. However, a short sale, similar to foreclosure are subject to paying tax on the amount forgiven. For more information, please visit the IRS website here.

One of the biggest benefits with a short sale is that you can sell your home and if you don’t satisfy the mortgage amount, the bank may forgive the deficiency. With a foreclosure, your house will be sold at auction, and if the amount it’s sold for doesn’t satisfy the mortgage, you’ll be liable for the deficiency. Lenders can go after this deficiency by attaching liens on other properties you own.

In addition, short sale will only reduce your credit score by 80 to 150 points while foreclosure can drop your score down by as much as 250-280 points.