Another potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.

Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.