Advice Needed On Dealing With A Secondary Lien...
Everyone,
Firstly, thanks to everyone who takes the time to read this and respond!
The Situation:
Over the last couple months I have been trying to put together my first real estate deal in the pre-foreclosure arena. After a couple tries that ended up being unsuccessful, I am finally working on one that has been (or at least appears to be) going smoothly (with one exception).
I decided to assume the loan on a property that I wanted to acquire. I did this because I wanted to pay back the bank, but also to see to it that the couple in financial distress ends up with a little money from their home. I called the bank, went over their assumption rules, and got off to a great start. In fact, the bank in question has already mailed me their assumption package and I plan on filling it out ASAP.
The part I am hung up on is a secondary lien on the home. It’s an additional loan for $18,000 and, naturally, I would very much prefer not to have to pay out that much. It would kill any chance of the couple in question getting money for their equity and would also end up taking a sizable chunk out of my profit as well.
I am assuming at this point that the secondary lien holder in this situation is at a significant disadvantage. If the home goes to foreclosure (and then to the auction house), all proceeds will go to satisfy the primary lien holder. If and only if there are excess funds from the auction (which, from what I hear, is quit rare) will the secondary lien holder be able to walk away with anything.
So, from the way I see it, the secondary lien holder in this situation doesn’t have very many negotiating options available to them. Since I am so close to making this particular deal work (at least as far as assuming the property is concerned), I would like to ask for a more experienced opinion on what to do with the secondary lien holder given the aforementioned situation. I personally feel (from a newbie perspective) that a short-sale would be the best option given the fact that the secondary lien holder has only two avenues open to them (that I can see): A. Work with me and get some money or B. Don’t work with me and end up losing all your money when the house is foreclosed on. So, assuming a short-sale on the secondary lien is the preferred avenue of action, how much should I open negotiations at?
I really appreciate any and all feedback I can get from the more experienced members out there! And, if my reasoning is completely flawed and there is something else I should try rather than a short-sale, please point it out to me!
Best,
Delta
Thanks for noting that, Mr. Pro. *takes notes*
According to the latest appraisal I had done on the home, it is worth $230k. Two different CMA reports I got from realtors placed it at $231k and $232k. The current remaining balance on the first mortgage is $193k.
And once again, thanks for your time!
Thank you for the input, Neberry!
I just sent in a proposal for 10% on Friday. *laughs* Had I known there was even a remote chance of getting away with 5%, I would have tried it! Oh well...
In Texas, auctions are held on the first Tuesday of every month in all 254 counties (subject to having something to auction) at the county courthouse.