Short sale 2nd and assume the 1st??

[Stephen N.]

I have found a potential deal I think.

the home is in foreclosure and the auction will be in November. There are 2 mortgages on the property. the first is a farmers home mortgage that is assumable. The second is a home equity loan.

Is it possible to negotiate short sale of 2nd and assume the first? or would he 2nd mortgage holder require the 1st to take a haircut as well?

[Scott Hubbard]

This can be very tricky if you do not have experience in this area. You can assume the first, but the second will remain unless you can first get them to settle.

If the first is underwater too, presumably, you will need to disclose to the first that you are planning to assume the first mortgage contingent upon the second agreeing to settle.

Usually the second will settle for 10 percent of balance of principal. They may also ask the seller contribute, either in the form of a note, or in cash. Also, there may be deficiency judgments to consider depending on state laws.

I have yet to see an assumable in a short sale scenario so good luck.