Will I be liable for the deficiency?
As of April 5th, 2010 according to the Home Affordable Foreclosure Alternatives Program (HAFA) any mortgage loan servicer that is participating in the Home Affordable Modification Program (HAMP) must release it's first mortgage lien and may not require a promissory note for any deficiency. For a second lien holder who receives an incentive under HAFA, no deficiency judgment, promissory not or cash contribution is allowed. 
NOTE- Mortgages owned or guaranteed by the Federal Housing Administration, Veteran Loans or Fannie May and Freddie Mac, HAFA guidelines to not apply at this time.  

Will I receive a 1099?
The debt forgiven may be treated as income. 


Will a short sale hurt my credit?
A short sale will effect your credit, but it's significantly less detrimental than having a foreclosure on your credit record. The effect of a short sale on your credit can be repaired quicker than that of a foreclosure and only stays on your record for 2-3 years compared to 7-10 years with a foreclosure. 


How long does the short sale process take?
There are many factors that go into the length of the process but typically it can take 60 to 180 days.


Can I live in my home during the process?
Yes, you are able to stay in your home until closing.


What if I no longer live in the property?
That is no problem; this does not negatively affect the banks decision.


Can an investment property be sold short?
Yes, any type of property can be sold through a short sale.