Shortselling 2nd lien only, questions

I am a buyer recently involved in short sale.

Owner has 2 liens, both with 1 major bank.

The listing agent told us the owner is just short selling the 2nd lien. She just told us this but for the past 3 months led us to believe there were 2 liens being shorted.

Can the owner do this (only short 2nd lien)? Does this type of short sale typically take longer, it is going on 4 months now and still no 3rd party approval. Does it run the same course as if they were just short selling the 1st bank?

We were told the 2nd lien just requested a payoff statement from the 1st, and we just signed an arms length agreement this week. Are these any indications that we are close to 3rd part approval?

I thought it was at least good news I now knew we were only needing 1 approval now...

Please advise if you can.

Replies

Layla John April 7, 2013 at 1:42pm

Thank you both Marivel and Elizabeth for the information! I just got a glipse of hope from your help. As normal, our agent cannot speak to their lender. The lender is Chase for both loans. Any information on their track record? The two documents they asked for last week were the arms length and an updated payoff statement from the sellers first leder.
Marivel Costanza April 7, 2013 at 12:43pm

Hi Layla:

Congratulations on getting your offer accepted in this competitive market.

In most cases, I like this type of short sale. However, I don't know the details of the seller's second loan and the best I can do is make an educated guess to try and help you understand the process. Here's a couple of items to look into:

Is your agent authorized to speak to the seller's lender directly? Not likely, which means you and your agent are at the mercy of the seller and their agent for information and updates. So, it's important for your agent to be assertive and follow up with the seller's agent on a weekly basis.

From the outside looking in, 4 months seems like a long time for an approval on a second lien. However, it's the basically the same process as a 1st lien and the lender may be doing their investigations on value and hardship before deciding on an approval.

Who owns the loan? Knowing this information may give you a clue as to their track record on approvals

The fact that they are asking you to sign the arms length affidavit shows that something is happening with the file and it may just be a matter of time before you and the seller get some good news.

Best wishes,

Marivel

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ElizabethWeintraub00697006LyonRE April 7, 2013 at 11:58am

I love these types of short sales because often there is enough money to pay the second far more than the second would get if the first were paying the second. How long it takes depends on who the second lender is and whether the second was hard-money (in California) because if it's hard money, the second might prefer foreclosure due to recourse rights.
Layla John April 6, 2013 at 3:39pm

Thank you for the information. I did ask my agent and she says it was an update, and the banks will ask for the same thing over and over and over. Hopefully it will end soon!
Wendy Rulnick April 6, 2013 at 12:34am

That's pretty far in (4 months) to JUST have asked for a payoff statement from the senior lien. This should have been done at the beginning, although the payoffs are usually only good for less than 60 days, maybe it's the second or updated payoff being requested. It seems pretty lengthy.
- Layla John > Wendy Rulnick April 6, 2013 at 12:43am
  
  Thank you for the information. Do you think I should ask my agent to ask listing agent if this is the case? Or anything else I should be asking to figure out what the problem is? Thanks!
  - Wendy Rulnick > Layla John April 6, 2013 at 1:12am
    
    I would ask out of curiosity. First of all, the payoff from the first had to have been obtained in order to create a preliminary settlement statement by the title company. If they didn't have one, they would not have been able to figure out the net proceeds to the junior lien now. This has to be an updated request. If the HUD is just going to the junior lien now, for the first time, then there is a serious problem with your process, in any event, it's quite unusual.