There are too many reasons to list why selling short is better than be foreclosed on. I will give you a few reasons -
1. The seller does not have to deal with the emotional stress of actually being foreclosed on, the sherriff's office kicking them out of their house. They get to know for certain what is happening and when. In a foreclosure they are at the mercy of the courts.
2. Judgements- If the court were to issue a judgement in the case of a short sale, you can work with the lender to avoid it, minimize it or make other arrangments. In a foreclosure you are at the mercy of the bidders at the court house steps and if the lender does not bid against the investors it can go for very little money.
3. Credit reasons, depending on how the lender reports it to credit it could say in the case of a settled for less than owed vs foreclosed
That can get you started.
As for other options sure the borrower has other options, Deed in Lieu, Forebearance(repayment plan), Modification and short sale.
Check
http://www.harrisrealestateuniveristy.com it has form titles workout programs for you to review.
