Timeframes vary by lender...Example - I've been working wth ASC on for one client since the end of October.
Already got the 2nd lender to agree to the short, but waiting on ASC. Finally got the BPO completed (went well...), got my own inspection for repairs, and will now push forward. Both lenders are aware that junior lien holders get nothing if the short fails, and the home goes to foreclosure. The default payout for the 1st lender is usually the 1k as mentioned for the 2nd, but this can be modified depending on how the short package was initially prepared. Expectations for the realtor, lender, and homeowner have to be carefully managed. It is critical to successful outcome. For example, you need to manage the realtor's expectation of the commission adjusting. This will give you slack if you need to negotiate a higher payout to the junior lien holder with the 1st lender. Nothing worse than seeing a good deal go sour because of a couple grand...I don't let that happen.
Again when facilitating the negotiations between 1st and 2nd, you need to make sure the 2nd understands the costs being saved by not holding out for foreclosure proceedings. Seems logical and they should know this, but they can be stuborn, and you need to lead them down the path where they actually start agreeing with you on the best alternative for them...the win-win approach to negotiations.
For example, a case I did, the 2nd agreed to 12K payoff for a 130K mortgage. When the first told me they would only pay $1K to the 2nd, the 2nd balked and would not initially go for it. It took a little Excel and some powers of pursuassion to point out that it will cost more than 12k for them to pay a firm to represent them in foreclosure proceedings, keep the home current with taxes, keep the home secure and weatherproofed during the foreclosure timeframe, etc, etc. Accept 1K now, take the loss, be done with it was a lower cost for them, and what they ultimately agreed to. But as I said, try to create a "better" win-win when possible, and usually work the realtor commission buffer to pay out more to the 2nd to show in good faith that you are working the best deal possible fr everyone. While many here may disagree and give up and say it isn't worth it, I say it is worth it because it does work. Experience and confidence is what makes the difference also.
Sorry, that sounds like I've been there, a little bitter maybe!! Right now..... as we speak as a matter of fact!!
The 1st mtg offers 1k to the 2nd mtg to go away, the 2nd comes back and want 10k to go away....and it goes on and on.
Now the 1st is tiried of going back and forth and says, "I'm done, its going to trustee sale and the 2nd gets nothing"(they are not insured)
All the while, I am screaming inside " Noooooooo, I just spent 6 months, with 8-9 offers, buyers walking away one by one in disgust, advertising dollars, and hours and hours of labor on this transaction"
It's never over until it over but we are certainly CLOSE to the finish line, not sure if we will cross over it though :0)