GL sent in this question:

I have a question, which maybe other people who read your blog might be curious about as well:

My parents, who live in Las Vegas, own a second property, a condo that they rent out. They owe about $70,000 on the mortgage. They are model borrowers who have never been late on a payment. Recently, they came into some cash, and are now in a position to pay off the mortgage outright.

Do you think the mortgage lender would be willing to give them a discount if they paid off the mortgage? And if so, how much? Would the fact that this is a second property, and not a primary residence, influence the negotiation, if there is one?

If this were a short sale of a primary residence, the bank would be happy to get $1,000 to $4,000 on a second mortgage in a market like Vegas.  So that is the best-case scenario.

What’s the best strategy?

You have to get their attention if you want a big discount.  Miss your next payment for starters.  I know, that sounds insane, but one 30-day late in this environment isn’t going to kill your credit score, and it’ll recover after a few years.

The minute you go 30 days late, the collectors start calling. Tell them you have no intention of ever making another payment.

Then the week before you go 60 days late, send them a copy of a cashier’s check for $x amount, made out to the bank or cash, and tell them they have a day to decide if they want it.  Mention that you’ll wire the funds today if it’ll make a difference.  Give yourself a couple of days before the 60-day late for them to make a decision.

What’s the right amount? I think they’d do $50,000 in a heartbeat.

I don’t think the primary residence or rental will matter, by the time you get to the collectors, it’s just a loan.