Short Sale Negotiated Release

Paul,

First off, many thanks to you for providing great insight and information on your blog!!

By following your “words of wisdom” I am in process of completing an approved short sale in which the lender has agreed to allow a full release of liability, a trade line entry of “Settled” (with no further language), and a zero balance.

My question is regarding the “Charge Off” listed (in their letter below). Does the “Charge Off” solely mean they will be writing off the loss in regards to tax filing? Or does it have other ramifications?

Do you have an idea of how this overall scenario (including the charge off) will affect credit and how long will it remain there?

Thanks again for being a “guiding light” for many of us!

Bob L.
Las Vegas

Copy of letter from lender follows:
Yes, we are agreeable to report “Settled” to the credit repositories without further language.  However, due to the large loss the Credit Union will be taking, due to our agreement with you not to pursue any deficiency balance, we will need to charge off the remaining balance on your Home Equity Line of Credit after the settlement.  When that transaction occurs, “Charge Off” will show on the Credit Report, although the amount due will show as “$0.00” as we will not be pursuing any recovery.

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Hello Bob L. Las Vegas,

You’ve done a great job.  Aside from having the lender remove the tradeline, what you’ve negotiated is the best that can be accomplished. 

The only other part I might add is that some time after the short sale closes and you’ve run your credit report, examine it closely to see whether or not there is an error.  Both the Fair Credit Reporting Act dispute process and the Real Estate Settlement Procedures Act Qualified Written Request can be used to clear up any errors.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.