2nd position lien holders are killing short sale deals- my 10c on reform that should happen!
A year ago there were many agents that said "I don't do short sales", in this market I can't imagine that there are any that can still say that.
In Howard County, Maryland, the third wealthiest County in the USA, the economy has not been as cruel, yet there are 320 ongoing short sale transactions. 163 are active listings ranging from $77,900 to $1,080,000.
Recently I was fortunate to list a short sale that took just over 2 months from list date to settlement. A major part of that success was that there was only one lender involved.
I imagine that there are a LARGE percentage of the current Howard County short sale properties that have 2 loans.
HOW MANY ARE GOING TO MAKE IT TO SETTLEMENT?
The horror stories of the lien holders in 2 position are starting to pile up. I have shared my ire at the unreasonable response from the 2nd lender in an ongoing short sale. Two great contracts came and went. Finally after more time, a third offer was submitted. Both banks still refuse to change their approvals. The 1st lender will give the second lender $6000 but the 2nd lender wants $19,000.
This was yet another tedious response.
The 2nd lien would need to be compensated appropriately to release our lien. Maryland is a deficiency balance state so we can legally pursue them for the account. The $19k to release the lien is a lot less than the balance of $192,534.99 that we could place a judgment on them for.
This lender is more than aware that Maryland is one of the States in the USA that allows deficiency judgments without limits in certain kinds of foreclosures.
Here is the breakdown of other Deficiency Judgment States.
The short sale reform that I would propose is that if a lien holder in 2nd position refuses to negotiate reasonably and hides behind the "We didn't take money in the bail out" defense and because of their actions the property proceeds to foreclosure, then they waive the right to exercise the option to file a deficiency judgment.
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