Short Sales and The Second Mortgage

By
Real Estate Broker/Owner with Rowand Realty Group

I am having some success getting the second mortgage to waive their lien by writing in an addendum say on a $200,000 purchase that states that the first  would get $195,000 and the second would get $5000. Has anybody tried this or have any thoughts on the tactic?

Comments (21)

Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

I haven't tried that but it might work?

Jul 06, 2008 02:47 AM
Trey Affolter
Keller Williams Realty - Tacoma, WA
Brings HOME Results!

Have not tried that...interesting tactic. But hey, if you are having success, that's great!

Jul 06, 2008 02:50 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Interesting thought process. My expierience has been that the two lenders normally will work out the payoffs between them. Generally the First will usually dictate to the Second how much the Second is to recieve based on the pain level of the Firsts loss. I would find it odd that a lender would allow a Buyer to dictate to them how much loss they would suffer.

Jul 06, 2008 02:50 AM
Chip Rowand
Rowand Realty Group - Davie, FL

In every Short sale that I have closed the first required me to work it out with the second to release their lien for $1000 to $3000.

Jul 06, 2008 03:00 AM
Randall Schrader
Competitive Insurance of Dundee - Dundee, FL

It's amazing that the second will stand down for so little.  Good info!

Jul 06, 2008 03:09 AM
Darlene Phillips
Century 21 Act-1 Realty, Inc - Las Vegas, NV

Chip, So in your experience as a Sellers Agent or Buyers Agent does the 1st Lein Holder require you to settle the seconds release?  Is the $1000-$3000 a misc free for just charging off the whole balance or is that supposed to be toward part of the payoff?

Jul 08, 2008 05:11 AM
Chip Rowand
Rowand Realty Group - Davie, FL

Yes that has been my experience. In every case the first doesn't even make a decision until I have negotiated with the 2nd. I have had several banks that hold the second accept $1000 to $3000 which they realize is more than they would get if the property goes into foreclosure. Some banks are easier to deal with than others but it really depends on the numbers. I am also finding that the banks are accepting offers that are between 70% to 82% of the BPO or Appraisal. Most banks want to see the property history from the MLS to see that you tried to sell the property for fair market value. It will be interesting to see how long the banks are going to be accepting these offers.

Jul 08, 2008 09:35 AM
William E. Lewis, Jr.
William E. Lewis, Jr. & Associates - Vero Beach, FL

I could not agree with you more, Chip.  As the lead referral source of short sales from Credit Restoration Consultants, I want to point out to the ActiveRain network that Chip is one of the more professional real estate agents that we have worked with in years.

Jul 18, 2008 10:27 PM
Maya Thomas, Broker
Tampa, FL
Please see my client recommendations.

Hi Chip,
Thanks for the good idea.  I've noticed that the 2nd mortgage holders are getting 1% of the sale price of the Sale and Purchase contract price, i.e.  $205,000 the 2nd mortgage gets $2,050.  I'm working with Citi on a deal and they are comletely unreasonable.  They have refused the deal unless we come up with an astounding amount of money.  The negotiator doesn't care if it goes to foreclosure because she'd rather see the first loose the deal.  She's spiteful and I'm not sure what to do.  Any ideas?

Aug 24, 2008 10:15 AM
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Chip:  I don't think there is much to what we write in a contract...especially when the first trust knows they are legally entitled to the first crack at money. 

Aug 24, 2008 10:38 AM
Chip Rowand
Rowand Realty Group - Davie, FL

Maya,

  Has Citi mentionaed a promissory note from the seller yet? I have a few clients that are agreeing to a small prom note that is an unsecured note that isn't attached to the property. I know that my sellers probably won't even make 1 payment on the prom note and there isn't anything the bank can do to them that wasn't done by short selling their property. You might try asking for the spiteful girls supervisor and plead your case but don't give up. Call me if you want to talk further and I have a person who negotiates my short sales and gets them done for $599 per transaction, she doesn't get paid if it doesn't close! She has been able to close deals that I gave up on.

 

Aug 25, 2008 11:35 AM
AJ Heidmann ~ CRS
McEnearney Associates, Inc. - Alexandria, VA
YOUR Alexandria & Arlington, VA Real Estate Expert

I have heard from agents in my office here in Virginia that the second lien holder will sometimes hold up a short sale for as little as $1,000, basically the cost for them (as they figure it) to deal with the process.  Provide them the $1K and they will forgo the rest.

Aug 25, 2008 12:02 PM
Anonymous
Susan

What is the probability of a short sale acceptance paying the first in full and the Second (equity Line) 50%?  the Second is Bank of the America. The first is Chase, who rumor has it is beginning to sell their loans to FHA instead of foreclosure under some new law.

Aug 27, 2008 04:25 PM
#14
Maya Thomas, Broker
Tampa, FL
Please see my client recommendations.

This worked GREAT for me!  Got an answer in writing in 1 day from the 2nd lender.  THANK YOU!

Sep 23, 2008 01:05 PM
Chip Rowand
Rowand Realty Group - Davie, FL

I am glad you could use the info. I am seeing a lot of the 1st and 2nd Mortgages asking for promissory notes to close the deal. They seem to be all looking for around 10% of the principle. The note is not attached to the property so if the person claimed bankruptcy the note would be wiped out. It will be interesting to see if the lenders accept short sales faster since the bailout was approved. Any thoughts??

Oct 05, 2008 06:09 AM
Lori Dean
Lori Dean Realty - Banner Elk, NC

Hello Chip,

I am working on a short sale currently with Wells Fargo, with a first and second mortgage held them by them. The 2nd was written at the same time as the first as purchase mortgage money in order for them to be able to write the loan for a total of 1,170,000. The first being 1m and the 2nd for 170,000. The first has just agreed to approve an offer and is offering the 2nd 3000.00 (the first is taking 80% of the FMV which was 834,000).  Do you have any experience with Wells Fargo and do you think the 2nd will accept that? Any tips you can provide as we venture our negotiating this coming week with the 2nd will be greatly appreciated.

Thanks, Good luck to everyone,

Lori

Jan 24, 2009 03:10 AM
Lori Dean
Lori Dean Realty - Banner Elk, NC

How's everyones Short sales coming along? I am surprised at how things have been progressing with the 2nd mortgage holders. They are indeed accepting $1,000 - $3,000. and are not going after additional monies or deficiency judgements. I recently had a short sale where the offer was made and the bank (1st and 2nd) accepted and closed in less than 45 days, start to finish. I have found out communications is the best policy. Keeping the dialog going between the sellers, buyers, and buyer's agents ( if one is present) has been the key to successfully keeping all parties actively in the game. If anyone has investor/buyers who are interested in a steal, I am currently working on a short sale for a luxury mountain log home. It costs owner/builder $1.1m to complete. The amount owed on mortgage is $749,000. and the bank says bring all offers. I am guessing they will probably settle around $650,000. +/-. Anyhow, good luck to everyone! Hope things are picking up a bit for you.

Lori

May 06, 2009 08:20 AM
Anonymous
Shawn Anderson CNC, SRES, CDPE

Help! Here are the details. 2 Loans. Both Wells Fargo. 1st is home mortgage and the 2nd is Home equity. The first is approved and the 2nd is not approving. 1st is offering $3000.00. 2nd is saying they want more. Meanwhile my buyer has sold their home, closes in 3 weeks with a new baby and no where to go. Buyer is offering 2000.00 to first and 2000.00 to the second. Still no response. What more can we do????

Jun 16, 2009 09:36 AM
#19
Anonymous
Shawn Anderson CNC, SRES, CDPE

Help! Here are the details. 2 Loans. Both Wells Fargo. 1st is home mortgage and the 2nd is Home equity. The first is approved and the 2nd is not approving. 1st is offering $3000.00. 2nd is saying they want more. Meanwhile my buyer has sold their home, closes in 3 weeks with a new baby and no where to go. Buyer is offering 2000.00 to first and 2000.00 to the second. Still no response. What more can we do????

Jun 16, 2009 09:40 AM
#20
Margaret C. Taylor
Century 21 New Millennium MD - Mechanicsville, MD
St Marys/Calvert/Charles MD Real Estate Agent

If the selling price covers the first Lender do you do the Short Sale with the second?  Margaret C.

Apr 23, 2010 08:35 AM