Replies to This Discussion

Permalink Reply by Tammy Davis on April 17, 2012 at 6:59am

A short sale is a short sale regardless of what is owed on the first or the second mortgage.

You need to determine what the 2nd is willing to accept as a payoff, then if it creates a short payoff on the first you will need negotiate with them as well. Most 2nd mortgages (depending on whether it is HAFA or not) will accept 10-20% of the balance as a payoff.

Good luck...this is where the negotiation starts.

Permalink Reply by Michelle L Houze PLLC on April 23, 2012 at 7:38am

No, I totally understand how SS work...I have done tons of them...

My question was more of a "what has your experience been with IM as the holder of the 2nd lien".  The first has a balance of only 197 and the 2nd is 350.  Home is worth 425 on a bad day, so the first needing to be shorted is a stretch, although....who knows, right?

And then also, my other question is, will IM allow tenant to purchase or do they also consider it to be a non-arms length deal?

Permalink Reply by Satar Naghshineh on April 23, 2012 at 8:44am

1. As long as they think they can net more by doing the short sale rather than foreclosing and paying of BAC, they will do the short sale.

2. Yes, because if they are not being paid, you want them to hold off on foreclosing so that you can complete the short sale with the 2nd. If they are unaware that this issue is being dealt with by the junior lien holder, they will continue with the foreclosure process. Basically they will get paid and the question they need to ask themselves is who will pay for the foreclosure process.

It was pretty common right before the market tanked, usually due to medical bills. Someone in the family would get sick and they would take out a HELOC on the equity of the home to pay the bills and if that person didn't recover, had to default on the payments. Had 2 of them like this. My advice is to move fast because if either lien holder smells more money by foreclosing, you will see the fastest foreclosure proceedings in your area!

Tenant should be fine as their relationship shouldn't affect property value. Doublecheck on this and I guess you will need to show that you marketed the property with no other offer stronger than the tenants.