I have a client that is trying to sell a property that has already rec'd a NOD from the 1st lienholder - no sale date yet but expected around July 3rd. We are in California. We have rec'd a GOOD offer at $650k but it is short of paying off the 1st owed $695k. 1st lien wants a release of lien from the 2nd lienholder (owed another $160k) to proceed with the short sale - 2nd lien wants to negotiate terms of the sale including agent commission and demanding a new HUD specifying their payoff which MUST come from the buyer (not the seller). They are refusing to provide the release of lien letter and holding up the short sale process with the 1st. We may likely lose the buyer and the house to foreclosure if the stale mate doesn't end soon. I don't understand the benefit of the 2nd lienholder stalling this transaction? Can they foreclose before the 1st while they are still considering a short sale even though they have not yet filed an NOD? And even if they did, aren't they still subject to a large 1st lien that probably would not sell on the court house steps? What am I missing? 1st is with WAMU, 2nd is with Ocwen. Thank you
If the 1st mortgage company files for foreclosure the 2nd will be wiped out at the sheriff sale. As far as the 2nd wanting the buyer to pay the agreed payoff - that's normal. The buyer is the one bringing the money to the table because, supposedly, the seller has no money. That's the whole purpose of the short sale. You should be able to get the 2nd down to at least 10% of the balance, since they will end up with nothing after the sale. Most banks will take $2500 on the second short. You'll just have to include the second payoff in the deal and the buyer will have to be willing to pay it. I'm not sure why they would be trying to negotiate the terms of the sale, unless there is something wrong with the way the deal is written. Sometimes it's better to use the calendar to negotiate. The closer to sheriff sale you get, the easier it will be to get the 2nd to get serious.
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