2nd lien holder Wachovia wants homeowner to pay $50k note from Short Sale

one of my short sale deals has wachovia (in second position) requesting $6,500 to release the lien on the property so the short sale can be accepted, however, they still want the homeowner to sign a $50k note. i’ve been asked $5k before, but $50k?!

can both first and second lien holder seek dificiency judgements or just the first? (the first is the one foreclosing).

i’m tempted to mention the homeowner wants to file BK, but i do not want to use this tactic yet in fear it may back fire.

anyone want to share some input on this?


Hi Ryan,

         Everything is negotiable, you can propose and negotiate anything that may be agreeable to the lenders involved!

With that said it depends on the mitigating circumstances and the state the property resides within, generally speaking when the lender excepts the short sale the original note is considered settled, but when the lender wants to still collect there principle they have to ask for a promissary note to re-instate a promise to pay against the legal debt.

Depending on the state law depends on whether debt can be collected after the Short Sale, for example Arizona has state law prohibiting collecting the debt after a foreclosure or short sale, basically making it a non recourse state.

If you are in a state where laws allow collection of the debt after a foreclosure or short sale then you can try to negotiate an agreement of nothing owed to some percentage of the original note, keep in mind if the state law allows collection after the fact, they may not feel compelled to negotiate and the threat of bankruptcy probable does not phase them as they can write off the whole debt rather than part of it due to a bankruptcy.

Yes the First, second and third, etc may seek a deficiency judgement reguardless of who forecloses if state law supports this.

Good Luck,


hey GR. yes NJ does allow banks to pursue the deficiency.

i understand everything is negotiatble. i could always increae the offer price, but i don’t think there’s enough spread in there to come up much. as mentioned before, a $50k note is quite large.

2nds seem to always be unreasonable unless a pending auction is close.
They rather wait for a better offer to come or try to scare you or the seller into accepting an outrageous deal.
do some research - i think these proposals would then be unsecured notes – if that would matter.

If you are in a deficiency state it may take time closer to the sale or the mention of that BK thing. Prepare numbers for them of your estimate of their net proceeds after foreclosure. Make sure to include a timeline including the time for filing the bankruptcy and for getting the stay lifted, show additional months payments which will be due to the first lienholder, additional legal fees to the first for the foreclosure (usually at least $10K), cleanout costs, taxes, insurance, property maintenance, 6% realtor commissions, and an estimated sale of around 90% of FMV. Big ? - is there anything left for them after the first lienholder chalks up all these fees and accrued interest for however many months it takes to foreclose and resell the property? My guess - far less than that $50k they are asking for. How much equity, IF ANY, is in the property now?