Help!!! 1st and 2nd won't let 3rd get any $

I have a 1st with GMAC, 2nd with BofA and 3rd with MCT Group a collection company for USE Credit union. The 1st and 2nd have agreed to the short sale but will not allow any $ to go to the 3rd. The 3rd wants $12,000. Has anyone experienced this before. I have never had to deal with a 3rd.

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Permalink Reply by Wendy Rulnick on January 10, 2012 at 1:02pm

Mike - It sounds like the collection agency has a judgment lien on the property.  We get that situation in Florida quite often.  You can do a few things. Have the seller settle with the collection agency at any time prior to closing. They might agree to remove the lien for a promissory note with lesser cash settlement. Or see if they will agree to move the lien to another property, if the seller has one and is amenable. Or see if the seller can bring a lesser amount to closing to just get a lien release and deal with the collection agency separately after closing.

Permalink Reply by Mike Giancanelli on January 10, 2012 at 1:58pm

Thanks for the info, The 1st and 2nd have agreed to a purchase price of $740K and the buyer is willing to pay the additional $12,000 to the 3rd above the $740,000. The problem is how do I have them pay it and not let the 1st & 2nd see it on the HUD

Permalink Reply by Wendy Rulnick on January 10, 2012 at 2:04pm

Hi Mike - Often, the other liens do not care at all if the buyer pays a lienholder, only if the seller does... You can ask OR you can submit a HUD for approval showing the payment.  

Permalink Reply by Mike Giancanelli on January 10, 2012 at 2:30pm

Thanks Wendy - Wow I can't believe it. I did that exact thing on a Carrington deal a few months ago. It was how Carrington had us payoff a 2nd. Thank you for your help on this. P.S. Love the site.

Permalink Reply by Wendy Rulnick on January 10, 2012 at 2:31pm

Good luck! You GOT it!! Give us an update.  Glad you like the site, too :)

Permalink Reply by Jaryd Ruffner on January 11, 2012 at 9:32am

Usually, that 3rd will have to be settled before closing. The 1st typically won't allow a contribution to the 3rd that large regardless of who the contributor is. Many times this can even be an investor guideline if 1st is Fannie or Freddie. I've had luck settling with these 3rd "judgement liens" before closing for a fraction of the lien's value. Get it in writing and have seller send certified funds to 3rd so they will no longer need to be on the HUD-1 or part of the short sale. Good Luck!

Permalink Reply by Bryant Tutas on January 15, 2012 at 1:20am

xxx

Permalink Reply by Joey on January 15, 2012 at 4:40am

Did you check with the title company to see if they are actually on title?

Permalink Reply by Jenny Darling on January 15, 2012 at 7:37am

I have been working with this type of situation and found that doing the following has worked. The 3rd has to give short sale approval in writing prior to any funds being paid to them. My seller has sent a payment to the 3rd directly as a normal payment outside of the real estate transaction prior to closing. These funds are acknowledged by the 3rd and they show a settlement in full. It is not shown on the HUD 1 because it is not part of the short sale closing.

Permalink Reply by Ryan Simpson on January 15, 2012 at 1:38pm

Depending on the size of the 3rd lien, you might want to get your client to a bankruptcy attorney.  Through a chapter 7 bankruptcy you can strip all non-consensual liens off of title.

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