How do you sell a house that has 2 mortgages on it??

6 Replies

So my fiance's dad passed away a few months ago and left the house to her and her brother. They want to sell it but there's 2 mortgages on the house. I believe there's $60K owed total, would have to double check that. It's located in North Raleigh off Six Forks and Sawmill. Similar houses are selling in the area between $170k and $180k. Rents are around $1,300/month. What are their options?? Thanks.

We need to know the disposition of the property and mortgage. Has the property been titled in the new owners name? Did they assume the mortgages?

If they hold title, contact a local real estate professional and list the property for sale. When the sale closes the title company will satisfy the mortgages and disburse the proceeds. Make sure someone is paying the mortgage(s).

Hi @Reese Davis - In most situations, having a second mortgage will not cause problems when you sell your home. It's really no different than selling a property with only one mortgage. At closing, the attorney will pay off both mortgages, and cut your fiance and her brother a check for whatever is left over.

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From a legal perspective, any mortgage recorded after another loan is a second mortgage. However, lenders construct second mortgages as either home equity lines-of-credit (HELOCs) or shorter term, higher interest rate, full disbursement mortgages for homes.

When selling a home, a second mortgage, regardless of the homeowner's use of the funds, reduces the seller's cash received at the closing of the sale. A second mortgage, however, should not prevent or disrupt the sale. When the title company, escrow agent or attorney prepares the closing documents, they simply factor in the second mortgage payoff amount into the final distribution of funds to the seller.

A second mortgage should have little or no effect on a homeowner's ability to sell her home. While the effects on buyers are nonexistent, sellers must pay off second mortgages just as they must pay off first mortgages. Sellers must deliver their property free of encumbrances, including any outstanding loan balances, to qualified buyers. The attorney must collect the first and second mortgage payoff amounts and ensure that the liens are removed from the sold property.

As sellers, you must consider two potential issues when selling a home with a second mortgage. First, you should reexamine your second mortgage loan terms to learn if there is a prepayment penalty associated with your note. Second, be sure your home's value is sufficient to pay off both the first and second mortgages (which you eluded to in your original post).

sounds like you can go through probate and each party can net about $25,000 each If you owe $60 and arv is $170 providing  closing costs and whatever repairs you need are not much over $10,000

When you say, 'left the house to her and her brother. . ' was this via a will, and was the house then deeded to both of their names? Reason I ask is there is a process by which they need to go through probate and identify any and all heirs if there was no will. Also, do you know if they have any of the info for, or tried to contact, either of the mortgage handling companies. Some mortgage handling companies are also registered debt collectors in the state of NC and can be frustrating when trying to get the payoff amounts when you try to sell. They'll say they can't give the heirs any information because they are not the individuals listed on the loan docs. There are consumer protection laws in place which says they do have to release this information to a Trustee or the heirs, but they will play dumb so they can rack up the late charges prior to giving you the payoff amounts. Even if they decide to keep it and rent it out, they need to verify the mortgage company will tell them how to transfer the docs and mailing address, along with allowing them to continue to pay or assume any finances.