A short sale is an alternative to a foreclosure. The seller will sell a home for less than what is owed by a lienholder. Seller is then responsible for the remaining balance called a deficiency. A short sale does have a negative impact on a credit score. Sometimes an owner can pay the negative balance, but most people opt to pay the deficiency in payments. I would not recommend a short sale, but many people take this option to prevent a foreclosure which may have a much higher impact on a credit score.