Although a short sale can provide distressed homeowners with a helping hand towards solving financial hardship, don’t expect a short sale to solve all financial problems.

Short sales can have tax and credit implications. Before you considering a short sale,  speak with a certified public accountant or a tax attorney to determine what your financial obligations will be after the sale. There are a few different situations that you need to be aware of before going through with a short sale.

If you are forgiven a significant amount by your lender, the IRS may consider it debt relief income, and you'll be expected to pay taxes on that amount.

Also, your lender may require you to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. The lender may not allow a short sale unless a note for the full amount is signed by the borrower or the “right to pursue a deficiency” is outlined in a statement signed by you.

While a short sale will not be as damaging to your credit as foreclosure or bankruptcy, you still need to be prepared for a negative impact. How much damage a short sale will do depends on how the lender reports the deal and also the information already contained in your credit report.

While these will be negative marks on your credit report, it is possible to get them off your report in a few years. Remember, all of these options are better than a foreclosure.