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I have been doing short sale for sometime now, but this is a first where the bank is getting more money back then the net proceeds. I know that anything over the net must also go to the first.  I have a short sale where the 1st trust payoff is $125,000.00.  The borrower has a second trust with a credit union for $63,000.00.  We have a offer for $200,000.00.  On the first trust it shows the bank getting back $174,000.00.  Forty nine thousand dollars! The borrower owes his HOA 13,000.00, which the 1st trust is not going to give no more than $1500.00 towards his delinquency. Even if the bank agrees to pay the HOA, the bank is still getting more than the exceeded net amount.  This leaves the net at $154,700.00.  If the second see that the 1st trust net proceeds is more, I am thinking that this will cause a problem, meaning the second is going to request for more money. The 1st trust is making a profit of $29,700.00!

What can be done in this matter:

A. Convert the 1st to a regular transaction do a promisorry note with the HOA to pay it off at closing and also with the second trust/collections to pay 1/3 of what is owed to them? At this point they will be getting more than what the 1st trust will allow?  Please advise.

B. Close and let the 1st make a profit of $49,000.00 and not pay the HOA delinquency

C. Continue with the short sale....and offer $6300.00 to the second and 1500.00 towards the HOA.