So I’m in the middle of a short sale as a seller and the 2nd lienholder wanted $7000 to release the lien. Total balance of 2nd is $47000. They received only 10% from the first - so $4700. My real estate agent is claiming that i need to pay the remaining $2300 to release the lien. (which is odd - since he said we won’t have to pay anything at closing when this whole thing began)
In addition, due to a divorce, I want to settle the 2nd lien completely (i’m willing to cash in my 401K in order to settle because of the divorce, I want no further ties or problems).
Originally, the 2nd wanted $28000 total to release the lien (so $4700 already received left me with $23,300 to pay).
Stupidly, I decided, let me see if they’ll accept less so I emailed the 3rd party negotiator and said, see if they’ll settle for $23000… which they agreed to in a flash.
Now I’m completely frustrated because i’m hearing that people are getting full releases for 10-15% - how much should I have offered and is there still a chance to fix this? the closing date has not been set yet for the short sale - and my 401K won’t cover the settlement, I was planning on borrowing from in-laws/parents etc but the inlaws and parents are saying that’s a crazy amount to pay…
advice??
(both loans are with PNC, the 2nd is a HELOC taken out at time of purchase as part of the downpayment and has not been used since purchase date)
it really depends on each individual lender and the circumstances when it comes to settling the 2nd mortgage. I have some that have taken $1000 on a $100k loan and some would not budge off of 50% of total loan amount. I have had more than a few deals be sunk due to 2nd mortgages.
In answering you question, and if I understand correctly, you have a 1st mortgage holder that will allow $4700 to be paid to the 2nd, but the 2nd requires you pay $7000 leaving a discrepancy of $2300.
Assuming I have the numbers above correct, you will need to pay off the remaining $2300 to clear the 2nd, that is correct. The tricky part is that the 1st lien holder may not allow you just put that on the HUD and pay it. The thinking from the 1st mortgage holder is that if you are going to pay any money, it should go to them as they are in the 1st position… which is true.
In order to combat this, you could ask the second mortgage holder to accept the $4700 from the proceeds and then sign a promissory note for the balance. You could ask them to make it interest only note that is payable before 12 months. This is pretty standard practice these days.
Hope this helps and good luck to you.
You need to review all the numbers and see if the extra expense for settling the 2nd is worthwhile. Do the numbers…if so, then pay the money and close the deal. I had a similar issue at the closing table and I was presented with an additional $11k to close the deal from an unexpected item on the seller’s side. I did the numbers and decided that I had plenty left if I paid the extra money and went ahead. Sometimes this works and sometimes not. You need to see.
If you are willing to walk from the deal, then negotiate more…otherwise, if yo can make a fare profit with the extra expense, go for it.
Rob