This is Andre'. Over a year ago I posed the original question about the tricky situation I was facing with a short sale and two loans, with the second larger than the 1st. Well, we will be closing before the end of this month, March 2010! The story is long and convoluted but the net result is that the property was put under contract in January 2009 for $425,000. The Buyers have hung in all this time, while the Seller's attorney , Jannine Mutterer and Catherine Olivetti at The Catherine Olivetti Law Firm LLC, worked with both lenders to make it work. They have been incredible. The 1st lender will be paid off and the 2nd is accepting the balance, without a default judgement against the seller.
Thank you to the agents who answered my original post.
I asked my contact at Access Loss Mitigation your question, and this was his reply:
" I have not heard of an instance such as that, and it is also quite rare that the balance of the 2nd is greater than the 1st. I will say that the 2nd will want money, regardless of if it is 275 or not and that at a 10% return thats roughly a 32k payoff to the 2nd. It will be quite a difficult deal to get done as the higher the balance on the second, the more reluctant they are to take a loss.
Hope that helps!
Access Loss Mitigation
Toll Free: 1-877-256-5450 x514
The only thing I can be certain of is that every underwriter is going to have a different answer to being asked to discharge a loan. If the second isnâ€™t discharged your seller may be responsible for making payments on that loan for the next 30 years. Your selling agent may have had an experience in the past that may have no bearing on your current situation.
The underwriter that I'm dealing with required a preliminary HUD with the short sales submittal. The HUD made it very clear what price would discharge the 1st and how the closing costs impacted that payout. They also required that the 2nd net at least a $3,000 fee in order for them to consider the offer.
We are going to have a RE attorney deal with the lender negotiation. A tax attorney can clarify the benefits of a short sale or foreclosure. There are a number of attorneys making this coombination a profit center for their businesses.
Best Regards, Dan Mengedoht, Carolina One Real Estate.