If your lender can seek a deficiency on your recourse second loan after either a foreclosure or short sale, you should still complete a short sale. A short sale is generally a better option than a foreclosure for two primary reasons: (1) a short sale is much less damaging to your credit rating than a foreclosure, and (2) a short sale is going to reduce the balance owed to the second lender by the payoff amount received by the second lender in exchange for approving the short sale and releasing their lien on the property. Therefore, any remaining deficiency balance is going to be less than if the property was sold after a foreclosure.