BEWARE One Reason to Consider the Short Sale of Your Home Before You Are 6 Months Behind with Your Mortgage

BEWARE One Reason to Consider the Short Sale of Your Home Before You Are 6 Months Behind with Your Mortgage

This is especially important for those homeowners who have a second mortgage.

First, what is a charge-off?

Lenders may write-off or charge-off a delinquient account as bad debt.

The charge-off could happen between 180 and 240 days from the date of the last payment made.

If your second mortgage goes into charge-off status that means that the account has been moved to the lender's own internal collections department or the debt may have been sold to a 3rd party collection agency.

If the second mortgage has been charged-off, the property may be in danger of foreclosure. Why?

Typically, the collection department will want 5% of the sale price or 10% of the 2nd loan balance for approval of the short sale by the 2nd mortgage. The buyer may need to contribute the difference between the amount the second is asking for and the amount that the first mortgage is willing to give the second mortgage from the proceeds of the short sale. The contribution may be a significant one. Not all buyers can or will pay the amount needed. This could kill the short sale.

I am sharing this information because I am attempting a short sale with a 2nd which has been charged off. The 2nd with GMAC has been sent to GMAC Recovery Department. The first mortgage is Bank of America. I told them from the beginning that the 2nd is a charge off and gave them the amount that they want-- about $13,000. Bank of America continues to say that they will only give GMAC $3000. The buyer does not have $10,000 to contribute. GMAC is saying that Bank of America would do better by giving them the $13000 than letting the unit go to foreclosure. Bank of America says their investor may be better off letting it foreclose. Where does this leave my seller's short sale?