Foreclosure in El Cajon>Question Details

Zaphod, Home Owner in El Cajon, CA

When does the second lien holder get notified in a short sale?

Asked by Zaphod, El Cajon, CA Thu Mar 8, 2012

The primary lender is still deciding if they will allow my short sale. Should the second be notified now or wait until the first makes their decision? Should I gather all the same paperwork I had to do for the original package or will they just want the response from the first?

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Vic Yamauchi’s answer
Zaphod -

You should get the same paperwork together for the 2nd lien holder as you did the 1st. Each lender has their own list of things needed so you or your agent should have contacted that lender the same time as you are losing valuable time. No short sale unless all lien holders agree. Not passing judgment, just saying.....

Remember that each decision of one lender may or may not affect the decision of the other as each has their own motivation as to approving or not approving the short sale.

Example, the 2nd lien holder stands to lose the most if you home goes into foreclosure but also stands to gain the least out of the amount owed paid back if they approve the short sale since they knew they were in second position going into the loan transaction. Like 10% to 15% of the amount owed so they are not as inclined to be 'enthusiastic'.....

Now, if the 2nd lien was sold to an trust deed investor at a discount, that is a whole different story. I have seen such investors hold firm on what they will settle for as they know a certain amount of their portfolio will be a loss but would made up by other like investments. Calculated risk and brinkmanship on how they play their cards and they do it for a living.

Take care......

1 vote Thank Flag Link Thu Mar 8, 2012

It depends on what you want to accomplish. You can notify the holder of the 2nd TD, however, in many cases they will not negotiate the file until you have the Approval Letter from the holder of the 1st TD.

This is definitely one of the most complex processes in real estate. We use an expert short sale negotiator on our short sale transactions and he is well worth the cost involved as they have closed every SS listing we have taken.

Hope this helps,

Mark & Kari Shea
Shea Real Estate
0 votes Thank Flag Link Thu Mar 8, 2012
Hi There,

Fist of all, what is your agent telling you? You should definitely have one. It's not like you have to pay anyone's commission out-of-pocket, it all comes out of the proceeds from the sale. But, you are more likely to close, one reason being, the bank will not let you accept any old offer. Another reason being an agent knows when the short sale is on track or not, you don't, or you wouldn't be asking this question.

The bulk of your loan is with your primary lender, so they'll decide first if they're going to allow the short sale. After all, if they want to foreclose, they don't have to ask the second lien holder, but your second lien holder can foreclose without asking the first too, it happens all the time. If your primary lender allows the short sale, and it takes time, they'll notify the second lien holder and negotiate from there. You don't prepare two sets of financial paperwork.

Good luck!

0 votes Thank Flag Link Thu Mar 8, 2012
Hi Zaphod,
At this stage you should be working with a real estate agent. It concerns me that they do not know the answer. As Phil stated below, you should be working with an agent the has experience in short sales. It is a very tricky and complicated process and not every agent knows how to navagate through it!

Good Luck!
Sinead McAllister
0 votes Thank Flag Link Thu Mar 8, 2012
It depends. If you get a Pre-approved Short Sale the lien holders would be notified after the Short Sale Package is completed and submitted for approval. If it is Non-Pre-approved Short Sale the lien holders would be notified after the Short Sale Package is completed, the property is listed and a fully extecuted Purchase Agreement is submitted.

Your best bet for success is to work with an experienced Realtor and Short Sale Specialist.

If you need further assistance please call me at 619-997-7459
0 votes Thank Flag Link Thu Mar 8, 2012
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