BiggerPockets

Jim

2nds always take the biggest hit in the foreclosure world..

Unless...both the first and the second are owned by the same lender.

In our world, I only pay the 2nd 10 cents on the dollar, period. That is 10 cents more than they will get at the auction, where it is likely that they will get nothing.

Tony

To note!! A lot of 2nd's are HELOC's/lines of credit. They are ReCourse notes! They have the right to go after the property owner-where as a straight 2nd, usually gets wiped out. Most Heloc 2nd's right now want at least 20% +, of amt owing. Recently, I had a short sale with Wells Fargo, they held the 1st and Wells Fargo assest management division held the HELOC. 2nd. Guess what? the 2nd wouldn't accept the 1st lien holder's payoff. Go figure that one out!!! If the short sale property has a 2nd-make sure you know ahead of time it's classification. If it's a HELOC 2nd-negotiate that note first before you submit the short sale package.

I tried to buy a pre-foreclosure that had 3 notes against it. The second looked like another group of the same bank. The third was a different bank. Funny that the owner was not paying on the first 2 notes but had been paying regularly on the third. When I tried to negotiate with the third, they wanted the whole loan amount. Apparently, the banks rules prevented the loss mitigation office from negotiating a short sale.

At the auction, the property sold for the value of the first, the third lost it all.

In general, most seconds I have negotiated with have been happy to get 10%.

Matt brings up a good point.... It really depends on a great many factors whether a second will accept what the senior note holder will allow.

Those variables include:

Settlement Offer Amount
Recourse or non-recourse
Purchase money or non-purchase money
State foreclosure laws
Investor or lender policies
Coming off a loan modification
Borrower Financial Analysis

Just to name a few. In my opinion, there are just too many variables to have any prejudices. The best thing to do is try, then try again.

You can also attempt to handle settlement outside of closing, that can add tremendous value to a transaction.