Obviously circumstances are different in other parts of the country, but here in the San Francisco East Bay and specifically in the Walnut Creek Real Estate market the conditions are such that working through the short sale process can be a much better course of action when compared to either a bankruptcy or a foreclosure.
One of my lenders sent me a coomparison of the different timelines required to re-enter the home ownership market and stated quite clearly that for conventional conforming loans the minimum for chapter 13 BK was 2 years from discharge/4 yrs from dismissal, foreclosure is 5 years from completion, short sale is 2 years from completion. All of these time frames also vary by loan type and % down … and also other conditions like months behind in payments etc.
Clearly in our area under typical scenarios it is far better for the owner to do a short sale. BTW we are also in an area where virtually all short sales being done have a no recourse clause in the short sale approval letter. So when the short sale is completed the homeowner is free of further obligation to the bank.
Short sales should definitely be one of the first options a homeowner considers when the circumstances mean they can no longer stay in their home … and have exhausted other options with their lender like loan modifications.