Short Sales Can Leave Homeowners Short

A foreclosure hits a homeowner twice: first by taking away the home, then wrecking his credit.

To avoid a black mark on credit scores, an increasing number of homeowners are working with lenders to sell their homes for less than what they owe. This process is known as a short sale, and while it can offer a good alternative to foreclosure, it's not without a few pitfalls.

A short sale is frequently an option when home values have declined, leaving a homeowner owing more than the home is worth. The lender, which must approve such a sale, receives the proceeds from the short sale and the debt is considered settled. ...