2nd lien is messing up the deal.

[Allen Wu]

Dear All, I need some advice on this deal. 1st is with WF and they approved the short sale already. The problem is with 2nd, Chase.

Chase needs 10% (which is about $15K) of the original loan amount PLUS a promissory note from home owner. WF is only willing to pay $5K, which leave a difference of $10K. The home owner doesn't have this money to come up.

I am working on this short sale as a realtor, so there isn't much profit in it other than the commission.

Can anyone please give me some advice what to do?

[Mike C]

Allen,

Unfortunately, the second can ask for whatever they want. Seconds are tough because they have to be willing to discount significantly to do a short sale on the first. For example, FHA will only pay a max of 2k to a second when they are the first lien holder. The point is if the second won’t negotiate and you cannot show them how much they are giving up (and even if you do they may not listen even if it costs them more money in the long run) you are dead in the water. You can try to reason with them, but in many cases they just won’t listen.

If they won’t listen, you just have to move on to better deals if you don’t have enough margin in the deal to pay them what they want (which is most of the time). As far as the promissory note the borrower must sign, these are usually non recourse (ask about this) so I would be telling the homeowner a smaller promissory note obligation is better than the alternative of foreclosure.

I feel your pain in trying to reason with them but in the end it usually doesn’t make much difference. After all, the processor or even the supervisor is not losing money so if they don’t do a deal it doesn’t affect them. They just follow their guidelines and move on, even if it costs them more money. Don’t let it get to you. As Larry suggests, you have to find out ASAP what the second will do before spending too much time on a deal as many just won’t discount enough to get a deal done even in this current environment.

I wish I had better news.

Good luck

Mike C