Question: If the first lien holder is foreclosing and there is a second lien holder who does not have a “notice of sale” clause and therefore is unaware of proceedings, you advise there is no reason to reveal the second in my hud statement when attempting to short sale the first. However, since I am buying the property pre-foreclosure, I believe the second lien will still have rights which means I will have to factor that amount into the purchase price which will make my short sale offer to the 1st much lower. If the 1st doesn’t know about the second, it seems that they would consider my offer ridiculously low. What would be their motivation to short sell it to me when they could let it go to auction and either extinguish any junior liens, or better yet be paid off entirely by the 2nd lien holder should they discover what is happening. It seems that it would be better in a situation like this to notify the 2nd position what is happening and try to cut a great deal with them and pay off the 1st myself. Am I seeing this correctly?
Thanks,
Jesse
Answer: – In this market, nothings seems like a ridiculous offer. No question you have to deal with both banks. In order for a short sale to go through you need the cooperation of each lien holder. Typically what tends to happen is you negotiate the amount you want to pay to the first lien holder. They will then decided how much they are willing to pay the 2nd to “release the lien” or “satisfy” the loan. Often times the 1st will only allow a small amount ($1000 or so) to be paid to the 2nd, which can be a slap in the face. So depending on the deal, sometimes you have to negotiate with the 2nd to pay them a different amount “handled outside of closing” so that everything will work out. In most cases, no, you don’t have to tell them there is a 2nd, they already know. You just need to tell them what you are willing to pay (short sale) factoring in also that you need to payoff the 2nd.
And the reason why they don’t want to let it go to foreclosure is because more than likely it’s not worth what is owed and the 2nd is not going to bid at the auction. Now obviously this isn’t the case all the time, but especially right now, homes values have dropped a great deal, some upwards of 50%, so they would rather unload it to someone else and take a loss now rather than end up with more inventory they can’t get rid of later.
My question is similar to the last post. I also have a first and a second and the house is listed as a short sale. I was told by my realtor that the second lienholder “usually wants 5%” of the proceeds. Since I’m not making anything on the sale, how can there be “proceeds” and how can I be held liable for any of the costs (the difference between the loan amount and the sale amount or any associated closing costs)?
Also, my realtor said that she doesn’t need “pre-authorization” from the mortgage company to proceed with a short sale. Is that correct?
Your realtor is right, they typically want 5% of the “loan amount” and if this is the case, you just need to tell your agent that the buyers will be “paying” for all the closing costs and settlement fee’s if they want the property because you don’t have any money to come to closing with. Or else your agent can pay the 5% out of their proceeds if they want. Your agent should also try to negotiate with both lenders a price that both can agree with and then you don’t have to worry about it because the 1st will payoff the 2nd in order to get the short sale pushed through and the house sold.
Yes, you DO need to sign over authorization to give your agent the right to discuss and work with your lender(s). That is the first thing your lender will ask for is that authorization letter.
Hello; We have recently had a very good modification from our bank on our first mortgage, we have a small second lein, that was originally with first century, bought out by a loan servicing company. They have refused to work with us on a modification, we have faxed six hardship packets, financials, hardship letters, letter from our attorney, etc. They have a call center in Mumbai India, and the people cannot communicate with you, they are also very rude. They lose your information, your paymennts don’t get posted, they charge excessive fees every month. They are now offering us a one time settlement on the loan, (which 5 years ago was $30,000 and is now $28,689) they sent us a document, stating they would close and settle the account for $3000, but they have some very ambiguous verbiage included and also want a signed copy of our HUD-1 sent to them (They say to compare with the one they are holding !0 Do they indeed have a copy of the original HUD-1, or is this just a scam to get their hands on our title ??? These people are unscrupulious, they have an F- rating for the BBB of central florida, and are the very worst of subprime loan servicing companies. Please let us know how to proceed, we only have until 4/30/2010 to sign and send their agreement, a signed copy of our HUD-1, and wire $3000, I don’t trust them
To me this sounds like someone is trying take some money from you. Although this sounds great…DO NOT WIRE ANYONE ANY MONEY. That goes for any real estate transaction. You tell this company you will settle but you’re going to involve a local title company or attorney who will hold the funds in escrow and once all the paperwork is signed and settled, they will receive payment. Until then, do not send anyone any money who says they will release the lien, because it doesn’t always mean they will, no matter how good it sounds. You need to do some due diligence and call your 2nd to verify they do in fact out source to India.