Foreclosure in Concord>Question Details

Carissa M, Home Seller in Concord, CA

Strategies in working with the second lenders. I want to do a short sale. I have two loans, two different

Asked by Carissa M, Concord, CA Sun Nov 18, 2007

banks. If I can get the first loan holder to agree, what about the second loan holder? If I foreclose or if I short sale either way it seems they will get nothing due to the decrease in value of my home in Antioch. How can I work with the second lender? HELP! Do they have to sign off somehow? Or can I do a short sale without them?

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Hello Carissa. No, you cannot do a short sale without all lenders with a secured interest in your property t signing off. When you have two lenders and not enough equity to offer the second more than just a few cents on the dollar, then the second lender does not have a lot of incentive to agree. Some second lenders will only agree to a short sale if the borrower agrees to a personal note. Either way, the lenders will not entertain any short sale negotiations until an offer is on the table. You'll also have to submit a short sale package to substantiate why the lenders should take less than what it owed. My recommendation would be that you retain a real estate professionals with short sale experience as trying to do this on your own is very difficult, time consuming and frustrating. You also want to consult with a tax professional regarding the tax consequences of a short sale (lenders have to issue 1099 for the amount of the debt that is forgiven). While there's a tax bill under consideration that might change some of that, there are limitations as I believe the Mortgage Forgiveness Debt Relief Act would only apply to purchase loans (i.e., loans that were given at the time of the purchase as opposed refinancing or post purchase- that's what I have heard).

If the property is foreclosed by the first lien holder, then the second will most likely end up with nothing as the proceeds from the bank foreclosure sale will most likely not be enough to pay even the first, let alone the second. While a short sale will affect your credit score, a foreclosure will be a lot worse.

Good luck to you.
Ute Ferdig
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4 votes Thank Flag Link Sun Nov 18, 2007
Ute Ferdig -…, Real Estate Pro in New Castle, DE
I recommend getting a Realtor to help you. I do a lot of Short Sales (just did one this past week on Mayfair in Concord) and it is critical that you find a Realtor that specializes in these. If I can be of assistance, give me a call.
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1 vote Thank Flag Link Sun Nov 18, 2007
The Hagley G…, Real Estate Pro in Pleasanton, CA
Carissa, these situations can be very complicated and both the other answers can be correct. I've seen it go both ways for sellers. Short sales can be denied if either the first lender or the homeowner can not successfully negotiate a satisfactory resolution for the second. But the second also knows they likely have -0- to gain by aiding it into foreclosure. If the second though files a notice of default first, it can open a whole other set of complications, so get a professional on your side to help you quickly. Time is of the essence.
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1 vote Thank Flag Link Sun Nov 18, 2007

The first answer is correct. Both lenders need to cooperate in order for them to release both liens. However, in many cases, I've seen the lenders actually negotiate with each other, and the lender in first position will actually offer the second a negotiated dollar amount to release their lien, so that the sale can take place, and the first won't need to take the property to foreclosure. It really depends on who the lenders are in this situation. Some are very cooperative, and other are not. Hope this helps.
1 vote Thank Flag Link Sun Nov 18, 2007
You have some very sound advice so far.
You might want to read my four part blog on Short Sales and Foreclosures.
0 votes Thank Flag Link Sun Nov 18, 2007
Keith Sorem, Real Estate Pro in Glendale, CA
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