Consider:

1. It sounds like a potential renter/buyer can find a larger home for an additional $20/mo. In that case why would they want yours? If $20 make a difference, you can be sure you don’t want them!

2. Are there houses available that could be purchased for market value or less? If so, yours is not a good deal and the strongest prospects will not be interested.

3. Is there any chance your home might need significant repairs during the lease period. If the entire monthly rental is going to the mortgage there is no buffer left for unexpected expenses.

4. If the buyer/renter can’t/won’t pay one or more months can you handle the payments until you get them evicted and the house re-rented or sold? You will be working long distance, so that will add to the difficulty.

5. It is really easy for a house that is ready to be rented to need thousands of dollars of fix up work before it would ready to sell. The other side of that is if your house is in “ready to sell” condition a renter can reduce it’s value by thousands of dollars very quickly. Carpet stains, the smell of smoke, etc. will bring the value down quickly.

I would strongly suggest you spend the money to talk with a local real estate attorney about the pros/cons of defaulting on the loan and/or a short sale. It’s kind of like removing a band-aid; pull it off quickly to get it over with, or pull it off slowly to spread out the pain. Unfortunately, it’s going to hurt either way.

Best of luck with whatever you decide.