Short Sales in Minnesota become a useful alternative to simply allowing a foreclosure to proceed, particularly when there is a junior mortgage in place.  However it is essential to obtain a full release of the debt secured by each mortgage. Many consumers and some agents incorrectly believe that the debt of the junior mortgage simply goes away with the foreclosure of the first  mortgage.  The lien of the junior mortgage is extinguished with the foreclosure of the first mortgage, but since the junior lender did not foreclose, its debt is not affected.

If you advise the owner to "just walk away" you may be unwittingly leaving them with a big problem. The property will be gone but the former owner still owes the full debt on the junior Note. He or she is subject to being sued on that debt at anytime within the following six years in Minnesota.

Negotiating a short sale with both lenders may be the best opportunity to deal with the debt on that junior mortgage. Plus, you have a good chance of getting the first lender to contribute some proceeds toward the junior mortgage, simply to buy their cooperation.

Jeff Nycklemoe

Nycklemoe Law Office provides short sale negotiation services.