If her dad cosigned the loan on the short sale property it will affect him the same way that it will affect her. Nothing will happen to the house that isn't sold short since that is a completely seperate house with seperate mortgages.
Good luck on the sales.
Coldwell Banker Burnet
Nothing happens to the first. That is a separate property with a separate mortgage. If her dad is not on the mortgage of the house being sold short then his credit will not be affected. Only the borrower's credit on a short sale is affected. Is she going to short sale it, or bring $10K to the closing? If she brings the cash to the closing, it's not short sale in terms of consequences to her credit or having to deal with the bank.
We are a professional short sale service and would be happy to answer all your questions. Feel free to call us directly. We look forward to hearing from you.
Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states