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Old 12-03-2010, 05:03 PM
 
295 posts, read 221,709 times
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Currently in a short sale with me being the buyer.We have written lender approval and escrow has just been opened. I will be doing my inspection tomorrow. However I don't know if the seller has signed and completed the terms on the deficiency judgment letter yet. According to the letter he has until closing to satisfy the terms. From my understanding we can't close unless this step is completed.

Seller has 2 mortgages, both through the same bank. Since this is in CA the first mortgage will be forgiven with the sale of the house but bank is reserving their right to go after the deficiency on the second. At this point, how many sellers actually agree to pay the deficiency rather than walk? I know there's no hard numbers on this but just curious if sellers tend to lean towards proceeding with the sale or just foreclose.
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Old 12-04-2010, 08:02 AM
 
Location: Lakewood Ranch, FL
5,337 posts, read 8,189,488 times
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I have absolutely no statistics but my experience tells me that it must be a very high percentage (i.e. in the 90's) who go thru with the sale. I personally have never had a seller back out for that reason and I've never heard another agent mention having an experience like that, either.
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Old 12-04-2010, 04:03 PM
 
Location: Aldie, VA
199 posts, read 603,583 times
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Can't the bank sue for deficiency after foreclosure in most states? So the seller would be better off completing the short sale, as they will take less of a credit hit.
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Old 12-04-2010, 07:09 PM
 
Location: Lakewood Ranch, FL
5,337 posts, read 8,189,488 times
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Definitely better to do a short sale vs a foreclosure. And, yes...they can definitely pursue a deficiency judgement in a foreclosure.
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Old 12-05-2010, 10:30 AM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 33,435,610 times
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YOu folk appear to be confusing terms.

A deficiency judgement is needed to go after the first..not the second. They don't exist in CA. They do exist in NV but never happen.

A second becomes an unsecured loan in most states after a short sale or a foreclosure.

It is not at all unusual for a large second to cause a short to fail. No seller in their right mind should leave such an obligation outstanding. Now if it is a few thousand dollars...maybe just pay it off or take paper...but a substantial second should be dealt with in the short sale.

A wise seller would go to foreclosure and BK rather than leave a large second standing. And that is why the second settles. You make it clear that foreclosure and BK will be the outcome if they don't.

Note that lots of short sale specialist will not take a client with a large second...particular if it is with select servicers...Greentree for example.
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Old 12-06-2010, 07:42 AM
 
Location: South Jersey
322 posts, read 479,504 times
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Since we're speaking of confusing terms allow me to clarify a couple points.

A 2nd becomes unsecured "debt" after Foreclosure (we'll get into Short Sales in a moment), not an unsecured "loan" as a loan implies that a payment structure is in place, etc. The 2nd lien holder does absolutely have the right to sue for breach, much like in a Credit Card default situation.

It's much cleaner through a Short Sale. In order to actually facilitate the sale (title has to be clean), the subordinate lien holder will recieve a nominal payment from the proceeds of the sale. Industry standard is around 10% of the outstanding balance, and quite frankly they're lucky to get that. So if you look at the odds of collection, does it make sense for a Bank to sue for unpaid balances when the best they will do anyway is wage garnishment? What does $100 a month for a $250k defaulted HELOC do for a BofA, Wells, or Chase..might as well write off the loss and call it a day.

So to answer the OP's question, from my experience with the hundreds of Short Sales involving subordinate liens. The 2nd lien holders will always try to negotiate a higher payoff, but they always blink because a Short Sale benefits them much more than Foreclosure.
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Old 12-06-2010, 08:36 AM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 33,435,610 times
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YOu have had a different experience.

Greentree as an example has held out for 10% of the gross received on the primary mortgage. Some first holders will not go that high...even if it causes foreclosure. Some of the lenders simply decline to pick up any...leaving it to the selller.

Again the pattern here must be different. Most short specialist decline two loan homes particularly if different lenders are involved. The lawyers will take them...but for an up front fee. I don't know how well the lawyers do but I would bet not near 100%
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Old 12-06-2010, 09:41 AM
 
Location: South Jersey
322 posts, read 479,504 times
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Greentree is tough, no arguements there. But I've found them to be fairly pragmatic and willing to "play ball" if the deal has been properly negotiated.

Loss Mitigation companies and "Short Sale Speacialists" have been popping up all over, promising to make your experience better if you pay their servicing fees. It's been my experience (and this is all I do) that an intelligent and motivated RE Agent is just as, if not more, effective.
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Old 12-06-2010, 12:27 PM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 33,435,610 times
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Quote:
Originally Posted by JLay36 View Post
Greentree is tough, no arguements there. But I've found them to be fairly pragmatic and willing to "play ball" if the deal has been properly negotiated.

Loss Mitigation companies and "Short Sale Speacialists" have been popping up all over, promising to make your experience better if you pay their servicing fees. It's been my experience (and this is all I do) that an intelligent and motivated RE Agent is just as, if not more, effective.
Agreed...but the RE Agent does not get paid up front so wants reasonable odds of success. Two mortgage lenders don't help.

I and others have found Greentree absolutely impossible except faced with imminent foreclosure. That does not, in my mind, qualify as pragmatic.
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Old 12-10-2010, 12:20 PM
 
9,738 posts, read 8,066,874 times
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How does the realtor get paid for a short sale when the 2nd trust is fighting just to get pennies on the dollar? If the realtor fees are 4%, do THEY get paid before the 2nd unsecured trust? Does the seller get billed/sued by the broker for the real estate fees?
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