Question For The SS Experts.
There is a property that is going into Foreclosure October 5th and the homeowner has basically walked away. He has it listed with a realtor so I gave the realtor a call. He said the the 2nd mortgage is Foreclosing for $240k. There is also a first for $130k. home is listed for $420k but needs a LOT of work...and the SMELL...WOW! The realtor said the bank is willing to accept a short, but I want to make sure how this will work.
Since the 2nd is foreclosing, it will now take over first position...Correct? and the first mtg will be wiped out if the 2nd forecloses...Correct? So, Do I offer the first mtg of $130k about $13k and try to short the 2nd mtg of $240 as well? I assume offering $160k or so.
Am I on the right track with this? and I assume that working with the realtor would lend some credibility in the transaction...Correct?
Any Help is greatly appreciated on how to proceed.
Thanks in advance.
The junior lienholder's foreclosure will not extinguiish the first.... but will extinguish the Homeowner's interest...
Your post should indicate the property's as-is, fair market value... since it is the FMV that is the basis for all short sales.
The first will not get wiped off if the 2nd is foreclosing. The 3rd, 4th, etc will be wiped out.
Determine a very conservative as-is value for the property and go from there.
i am in the process of doing a short sale right now and it has ONE mortgage (the house mortgage) that is what i am shorting. why is everybody talking about 2nd, 3rd mortgages and whatnot. why are there so many mortgages on one house? are these home equity loans that people took out attached to the house? this confuses me. thanks, Ryan
Actually, how many of the junior lienholders get wiped out is dependent on what the property brings at auction.
Also, the reason there are so many mortgages, is because the owner needed help when he bought it, or cashed out equity along the way with a junior lien without refinancing the first.
So what heppens to the first mtg? if it goes to auction will the sale price be for the $370k...which is 1st and 2nd combined??? or will it be for $240k??? I'd like to short this before it goes to auction but I'm unclear on how this scenario would work.
I thought if the 2nd forecloses, then that would then put them in first position and all others would come behind them since they initiated the foreclosure??? am I way off base on this.
Thanks again for your help and any explanation of how this might work.
Foreclosure laws and customs can differ from state to state, and from county to county. But, there are some general principles that are universal.
So what heppens to the first mtg?
Nothing has to happen to the first, at all. It stays in first position.
If it goes to auction will the sale price be for the $370k...which is 1st and 2nd combined??? or will it be for $240k???
If the second is due $240,000, and they are the Plaintiff bringing the action, then they can offer at auction their (junior) interest and set the minimum bid at their pleasure... or by statute. But make no mistake, unless indicated otherwise, you'll be bidding for second position... behind the senior mortgage.
I thought if the 2nd forecloses, then that would then put them in first position and all others would come behind them since they initiated the foreclosure??? am I way off base on this.
Yes, waaaay off base.... but that's not unusual. Many folks think that they can jump into this (niche foreclosure) industry without a foundation in real estate, real estate finance, real estate law, or business.
That's partially the fault of the guys and gals that hype their secret method to real estate success and riches... saying that anyone can become rich working part time from the comfort of their own living room....
But, that's more an exception than the rule.
[addsig]
If this property is listed with a realtor, I would highly recommend for you to let the realtor handle it. If he/she understands that this is a short sale, they should be able to handle everything beginning to end. All you need to do is decide the maximum that you would pay for this property and present your offer.
Good Luck.
Actually, Reinatale, that is only true if the realtor does short sales, which the majority of them do not do. However, since there is a realtor involved, it obviously was listed, and the listing agreement is often a required part of the short sale packet. If not required, it is certainly a good thing to include. If I am doing the short sale in this situation, I do the paperwork and negotiations, use the realtor for the listing agreement and BPO, rehab the property after the short sale is complete, then use that realtor to sell retail. I never let them control my paycheck by doing the short sale unless they have already started, in which case, I will let them wholesale it to me.
The fact is, I don't bypass the realtor. I work with the realtor. Actually, usually, it is the realtor who gets me involved. I may have mis-read the meaning of your post. I was thinking when you said the realtor should be able to handle everything from beginning to end, and that all you need to do is to decide the maximum you would pay for the property and present the offer, I thought you meant you tell the realtor what you want to spend, and they do the rest. If that is not what you meant, then what we have here is a failure to communicate.
Absolutely you need contact with the homeowner, and you need the auth to release from them as well, and yes they need to deal with you as well. Again, this is an instance where good coordination between you, the realtor and the owner is important.
I completely agree, ideally if there is a way to be involved yourself, that is the best way to go.