Home Buying in Columbus>Question Details

Jawrealtor, Home Buyer in Columbus, OH

I am buying a Short Sale home with two mortgages, and the second mortgage holder wants $2000 cash from us to release their mortgage, is that legal

Asked by Jawrealtor, Columbus, OH Sat Feb 18, 2012

The first bank accepted my offer, but the second wants more money from the first bank. So they want me to pay it in cash to them, not included in my mortgage.

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5 months ago I made an offer for a short sale home with two mortgages. The first lender agreed to pay the second 6 grand to release the lien. Both banks signed the offer and we had a closing date. Since this is to be an FHA loan, they decided to send their own appraiser. It was determined that the property may be worth more even though it has been in short sale for over three years and I am the 9th person to make an offer. The bank raised the price an the whole process started over. I raised my offer. A month later, I was told that my offer was accepted. However, the bank accepted my first offer which was lower.
The second mortgage bank has yet to sign the offer and we have missed two closing dates thus far. I was told today by the listing agent that the second mortgage bank is stalling in the hopes that it will go to foreclosure so they can go after the sellers for more money. There are laws that prohibit a second mortgagee from intentionally holding up the short sale process, but I have no idea how to prove this. The 8 potential sellers gave up on this process, but I have no intention to give up. Has anyone else been in this situation? Are there legal options?
0 votes Thank Flag Link Wed Nov 12, 2014
Technically yes that is Legal. Basically what is happening is the 2nd lien holder is looking for funds to "soften the blow" on the hit that they will take. If the 1st lien holder isn't willing to negotiate, you may have to pay that or lose the home. My advice to you is to go to the 1st Lien holder and ask them to take $2000 less for their payoff so that the 2nd lien holder can at least get something. The great thing is that you have all the power because if the 2nd lien holder doesn't get the $2000, the house will probably go to foreclosure and the 2nd lien holder wouldn't get anything anyhow. If I were you, decide if the $2000 is worth it. Are comparable homes in the area selling for much higher than what you are paying? If so, it may still make sense to purchase the home and pay the $2000. I would only do what you are comfortable with however.

Micah Riley, Realtor
330.338.5130 cell
Cutler Real Estate
-Dublin
-Upper Arlington
-Grove City
-New Albany
-Short North
0 votes Thank Flag Link Fri Sep 20, 2013
Try to negotiate those 2000.00 in the purchase price
0 votes Thank Flag Link Mon Mar 12, 2012
Jawrealtor

I recently experienced this representing the seller, lots of back and forth with the two on wittling the amount wanted down to get the deal closed.

All answers below are good ones. In addition, you need to make sure what is stated from 1st lienholder in settlement letter and terms of acceptance of offer that they are not very strict and matter of fact on what 2nd lienholder gets. Some will have a issue, potentially even killing the deal, even if it is taken care of in a legal manner.

Id suggest to consult your Realtor. Thats what he/she is their for, to help you.:)

Good luck
0 votes Thank Flag Link Sat Feb 18, 2012
Hi Jawrealtor,
This is very common with two liens on a home. Of course they can't compell you to pay them but if you want a home free and clear of any liens you have to do something. The first position investor may be will and good to release their lien on the home but the second is not always so accommadating. But, they will negotiate. All they want is the money and they don't care from whom before they release their lien. Of course the buyer could buy the home anyway with the lien attached if they waive their condition to a marketable title, free of liens and encumbarances,of course no one wants to do this.
Try to negotiate with them and offer starting at around $250.00. In the long run it depends on how much you want the home.
All the best,
Jeffrey Paeltz,SFR
0 votes Thank Flag Link Sat Feb 18, 2012
If the first mortgage holder will not pay the addition $2000 you can legally pay it. It adds $2000 to your cost of buying the house. If you think it is worth the extra money, go for it. Make sure the first lender is aware of the payment. It must appear on the HUD closing statement. Your Realtor can advise you.
0 votes Thank Flag Link Sat Feb 18, 2012
Yes it is legal. You can ask the 1st mortgage lien holder to pay it but, if they refuse the 2nd mortgage will have to be taken care of, so that a clear title can be obtained on the property. The only other way for the 2nd mortgage to be taken care of without them accepting something less is to go thru the full foreclosure proceedings. A title search should inform you what the 2nd mortgage amount is. And if you are getting a good price on the short sale. It might be in your best interest to pay The $2000.00 (if the first mortgae holder won't) and move into your home. Think about it, you should already be getting a good price on the property itself, what's another $2000.00 if thats the home you want. Of course get everthing agreed upon in writing.
0 votes Thank Flag Link Sat Feb 18, 2012
My guess is that you are stating the situation incorrectly. The 2nd lien is not happy with what the 1st lien holder has agreed to pay them and so they want $2000 more, but not directly from your pocket the way you make it sound in your question. They probably are asking you to pay $2000 more on the offer to cover the difference and yes that is very legal and very common.
0 votes Thank Flag Link Sat Feb 18, 2012
It is highly unlikely for the buyer to pay on the second mortgage . The first should take care of this. The buyer is buying the property..talk to your realtor .
0 votes Thank Flag Link Sat Feb 18, 2012
They want the money from you, the buyer? Hmmm......not sure if that's legal....but it might be if it's disclosed in writing an you agree to it. Do you mean is it legal to even ask? The second lien holder can basically ask for anything they want. Do you have to agree? No, but they also don't have to release the lien. Talk to your agent and maybe get an attorney.
0 votes Thank Flag Link Sat Feb 18, 2012
2nd is always prob try taking off price or tell first to pay it
Web Reference: http://troberts.pruplus.com
0 votes Thank Flag Link Sat Feb 18, 2012
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