As with all things regarding real estate, even payoffs to banks in short sales are negotiable. Of course, the bank knows they hold the better hand and may even try to pressure you to give up rights and remedies you have under the law. Hopefully, your Realtor has done this before and knows how to hold out on the important issues.
That being said, most lenders will not negotiate regarding credit reporting. They will report that the debt was settle for less than the full amount owed. This single item will usually cost you 50-80 points on your credit. Unfortunately, in a short sale situation, the seller's hardship will usually result in missed mortgage payments and these have a separate negative affect on your credit.
No matter what the cost to your credit for a short sale, it is usually far better to negotiate a short sale than to allow a foreclosure. If you want more information on why, feel free to contact me or go to http://www.StopMyForeclosureHelpNow.com for some great information and reports on the difference between a foreclosure and a short sale. Hope this helps and Dare to Dream.
Shel-lee Davis, CDPE
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
If you are still making your payments, then your credit has not yet been affected by the short sale. If either the first or the second receives less than the full payoff, then they will usually notify the credit bureaus that you settled for less than full amount. They arenâ€™t â€œgoing after your creditâ€, they are just reporting information as they have agreed to do. But it will effect your credit.
A settlement has to be negotiated with BOTH lenders. In most cases, the first usually signs off fairly quickly. Weâ€™ve found it is the second that gives us the most trouble. Hoping that wonâ€™t be true in your case, HOWEVER, weâ€™ve done a number of these and thatâ€™s the way it usually works out. The second will want the first to make some concessions so that both usually end up hurting your credit.