Short Sale to 2nd lien holder

[Jose Tovar]

I have SS clients who want to sell to their 2nd lien holder who is an associate of theirs. This individual put up 100k to help with the purchase/construction of the house which belongs the couple who are my clients.

My question is will the bank have any issue with selling to the second? I am concerned that they will consider him a party to the home and should not be allowed to profit from its short sale.

Thanks

[Scott Hubbard]

Originally posted by Doug Haisten:

Scott,
I agree, with this property I would not make any money (repairs, carrying costs, selling costs etc) and I wouldn't do the deal. Still, I have avoided SS deals with more than 1 mortgage. Since there are a good deal of properties with more than 2 mortgages I was curious how it is done.

When the 2nd lien is a purchase money loan like on a 80/20 or 90/10, then it is not much more effort on your part to take the extra step.

However, when the 2nd is a non-purchase money, then it becomes much more work and many times less equitable for the seller to sell to you.

I agree with James.... Generally it is 10%, but many lenders will limit the payoff to the second to $3K. Fannie Mae will not allow more than $3K. So, to stay in that $3K range, you should focus on 2nd mortgages with a principal of $30K unless your able to come out of pocket to sweeten the deal.

Good Luck!