A junior lien holder more than likely will loose their position entirely in a foreclosure. Mortgage companies that have a senior, or first lien position don¡¯t want to take a short sale of thousands of dollars and then see a junior lien holder get paid in full. You must call the junior lien holder and ask for a release of lien. Check with your attorney regarding county and state laws. Be prepared to fax or email over a written offer before you make this call.
Generally speaking, if a first mortgage accepts a short pay for the balance owed on the property then they will not let the sale go through if a junior lien holder gets any substantial funds. We use this as a negotiation point with junior lien holders. We state to them that the first mortgage company will not complete their short sale transaction if the second mortgage or other junior lien holders receive any funds from the sale of the property.
The logic is as follows: A first mortgage company is willing to accept less than what is owed to them because they believe that it is their best interest, i.e. they believe that the offer that is being made to them is better than the alternative of a full foreclosure. If this is true, then junior lien holders should follow the sale logic, and realize that they are not going to get any of their funds if there is a full foreclosure.
Conversation with the lien holder:
“Hello this is _______________calling from the _________________ (your) company. We are trying to purchase a property and one of your clients, or possibly yourself, are holding a lien on the property. The property address is _______________, the claim is against ________________and __________________. The claim was filed on ______________, the amount is _____________. The first and the second mortgage have agreed to take a short sale on this property. I need for you to take a payment on your lien and in turn release it from the property. You could loose all of your lien position after the foreclosure date. I am prepared to offer you $________ (10%) of total debt……I will have my attorney contact you for a release letter. He will coordinate the transaction when I close on my purchase of the home.”
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Increase your real estate profits by negotiating successful short sales. To learn more ways to avoid sticky situations when negotiating Short Sales visit us on the web at www.MyInvestorLink.com and www.SuccessfulShortSales.com.
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