1st mortgage: $24,000
2nd mortgage: $79, 900
no other liens or judgments
Home owner has appraisal from 8 years ago at $120,000.
I have no idea right now what this property appraises for right now. I am getting comparables done as I type. How is it possible to have a second mortgage that is higher than the first mortgage? The default amount that is being foreclosed on is $79,900 (2nd). I need advice on how to approach this deal!
<<How is it possible to have a second mortgage that is higher than the first mortgage?
Wow! My kinda question!
Answer: They borrowed more!
For instance…a person buys a property for $35K, puts 20% down and takes a mortgage for $28K. A few years later, they have paid the balance down to $24K but the prices have escalated. The property is now worth $120K. The owner needs some money and now has $96K in equity, so he takes a second for $80K…
Keith
Hi Keith,
As in a home equity loan(HEL), or line of credit(HELOC), right?
If this is a home equity loan, can the lender “promote” it to where it can’t be dismissed in a foreclosure? I’ve never heard of that, but I haven’t yet encountered one yet…
I found out that both mortgages are from the same lender. The homeowner will get an actual payoff balance faxed to him from the lender tomorrow. I got an appraiser doing a BPO on the property tomorrow to get an idea what the property will sell for. So the process is on the way. Thank you for your response! If you got any helpful information that I can use I will appreciate it.
I don’t want to sound negative, but looking at the facts you’ve given I think the lender would rather foreclose than give a discount on the notes.
If the FMV (did you get your SOLD comps yet?) and the BPO are substantially higher than the total of what’s owed (~$103,000) they would get more than the amount owed at auction.
If this house needs many repairs to get it in FMV condition, then you might have a chance if you can prove that it will take thousands of dollars to so.
Also, what do you mean by “I got an appraiser doing a BPO?” Did you hire an appraiser, or is the lender sending one out?
I hired one. The appraiser suggested that he could do a Brokers Price Opinion for $75 instead of a full appraisal for $300. I don’t want to start a habit of paying $300 every time I need an estimate of what a property is worth or could sale for. I thought this would help me save money. The BPO will help me decide if this property is worth doing a deal or not. Once the numbers are in my favor, I will do a full appraisal. Is this good or is there a better way?
Well, usually the lender sends its own BPO agent. I’m not sure if they would accept a BPO from an appraiser that you hired, obviously a conflict of interest there…
If they accept it, then great - just be prepared for them to say, “We’ll get our own BPO, thank you…” 
Good luck!
I am only using the BPO as an inexpensive way to get an idea of what a particular property will sell for. After the BPO I will get a full appraisal on the property.
I’m a little confused here, are you trying to Short sale the bank or assume or sub2 this place??