What do you experts think of making money short saling second mortgages? Can you make more than short selling foreclosures and how exactly is it done and why would bank short sell the second mortgage if they don’t know they are going to be foreclosing on it?
I don’t really understand it but had a investor tell me I should start with that , I said I would if I understood it. :rolleyes
I’m not an expert, but here’s my crack at it:
If a person has 2 mortgages on their property, 80/20, then the 80% loan is the senior lien and has authority to get paid FIRST in the case of a foreclosure.
For example:
If you have a 400k house with 2 mortgages:
80% = $320k
20% = $80k
If this house goes into foreclosure and at the sheriff’s sale only sells for $300k, this means that the 80% mortgage holder has full rights to the full $300k, and the 20% mortgage holder gets $0, nothing, nada.
If the house sold for $330k at the sheriff’s sale, then the 80% mortgage gets their $320k and the 20% mortgage only gets the remainder of $10k.
So a bank would short sale the 2nd mortgage on a house with little or no equity because they know they’ll probably get close to nothing at the sheriff’s sale, so it’s better to take our low offer than no offer at all.
Hope that helps.
That sounds like he described it but how do you start the conversation and carry it through. You have to convince them that the house will foreclose and won’t they ask how do you know that ? How do they think you know ,is it because you read it in a pre-foreclosure notice?
Thanks so much for helping clear it up to me better, but I’d have to see it done to have the confidence to do it myself. Thanks :biggrin
In a nutshell:
You start the conversation with the homeowner, who has to be behind payments already and you have them agree to let you do a short sale on the property.
You get the proper documents signed by the homeowner, basic 3 are:
-authorization to release
-memorandum of agreement
-contract of sale
You sign the authorization to release and it gives you permission to contact the homeowner’s bank. You contact the bank, tell them you have authorization, fax them the authorization, wait 24-48hrs for them to put it on file, then you tell them you wanna buy the house via a short sale.
They should then send you their short sale requirements and you follow through… for further info you should read up on short sales and look at posts on this website. You’ll find everything you need to know.
The problem here is what are you going to do with it when you get the 2nd reduced, is there going to be enough equity to turn around and sell or will you buy it yourself? You might want to consider that before all the work into doing ss.
Doing a ss on 2nd is easier as long as 1st and 2nd are behind. (or at least the 2nd, but sellers generally pay the 2nd because its the lowest and in meantime let the 1st fall into foreclosure)
ss are getting easier now because of market conditions
If you have a house with 80,000 1st mortgage and 40,000 on second , if you could get bank to ss the second by telling them that the HO is going to foreclose what chances are that they would ss it to you for maybe 2,000 and then buy the house from owner for 80,000 wouldn’t that be a good deal/ if house is worth 120,000 or do you see this possibly or probably happening?? I am honestly trying to get this:}:}
most def. thats a good deal. But does a 2nd short by that much, not hardly. Ss can be profitalbe, but they are a very long process and most of the time when the bank orders the appraisal you wont get 78K knocked off. you also have to keep in mind, if you get one approved you hve to close HML
but again, the 2nd is current
most sellers make that mistake, they pay the second becaue its cheaper, while the first is falling behind
I disagree. It makes no sence for borrowers to make a payment on one mortgage without paying the other. They both have a hammer of equal size and strength (foreclosure). However, the second is less likely to foreclose because they (at least in Florida) can not foreclose out the first mortgage.
Therefore, should they (the second mortgagee) prevail at the auction would own the property subject to the existing first.
Second mortgagee foreclosure actions are very rare unless there is sufficiant equity to provide impetus.
[quote author=Mellon_Head link=topic=31744.msg147450#msg147450 date=1190834453]
I disagree. It makes no sence for borrowers to make a payment on one mortgage without paying the other. They both have a hammer of equal size and strength (foreclosure). However, the second is less likely to foreclose because they (at least in Florida) can not foreclose out the first mortgage.
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Are you directing that coment from what I said?
I wasn’t saying to TELL the homeowner to only pay one of the mortgages, i was saying that is usually what they end up doing. they see it as the “smaller” bill and THEY think that it will all be ok… Not realizing they will still be foreclosed on. :smile
I thought you could get 2nd liens to short sale for 1 or 2,000.00 ? Is that not right?
In my experiance I have reduced them to 1-2K yes. However, there were also events where the second wouldn’t come off their number and it killed the deal. Ya just never know…