I have a question that I hope some of you an answer for me. If you are trying to short sale a house that has two mortgages how does it work? If you get the second mortage company to deal down the mortgage and you purchase that mortage do you automatically take over the first mortgage and are able to close and sell the property? I was a little confused on this aspect. Any help would be greatly appreciiated. Thanks!
each deal will be a little different, but yes, you can short sale the second and then continue paying the first…
Then again, there are many lenders who when holding the second lien position require the primary accepts a loss as well or they wont. See HERE.
So is it better to contact the firt mortgage holder before I would try to short the second? Or does it not matter which company I try to speak to first? By the way thanks for that link to the other forum it was a lot of help. Thanks!
You have to do both, but I would start with the primary. A common mistake made is when people try to secure the first lien short sale then go for the second. The problem is that once either of them accept a short sale they only give you a short amount of time to close. If you have not already began negotiating with the other chances are you will not be successful within the time frame required.
So, negotiate with all lien holders at the same time and always keep the others informed as to the status of your possession of a payoff from other lien holders so they are aware of your time line.
You do not automatically take over the first mortgage. In doing a short sale it has been my experience that you first need to evaluate if you eliminate the second mortgage is there enough equity to make the deal make sense. What we usually do is negotiate the first mortgage and show the second mortgage only getting $1,000 on the sellers side of the HUD 1. After we come to a negotiated price with the first we go back to all other lien holders and show them a written copy of the first mortgage offer. You are then able to make a case to subordinate lien holders to take a severe discount. If the first is willing to discount that means that there is not enough equity for the other lien holders if the property goes to sale on the court house steps.
If you just buy a second mortgage you are responsible for paying off the 1st. You can always try to take it subject to but there is no guarantee this will happen although they usually do not say anything.