HUD Pre Foreclosure Sale
I am a realtor for the Seller and we have a condo under contract for 125K scheduled to close 3/26/03. A Foreclosure sale is scheduled for May 7, 2003.
There is a 1st lien (FHA loan) for 118K, a 2nd lien for 8K and a 3rd (HOA) for 1K. The 1st has verbally told me they would take $110K as a short pay but they are also telling me that HUD only allows $1ooo to go to any and all junior liens. This is totally unacceplatable to the 2nd and it appears that the deal will fail. Is this true? Is there anything I can do? Please Help. Thanks.
Billie 
Unless the contract is contingent upon acceptance and approval (by all lien holders) of a short sale, you may need to advise the sellers that they will have to contribute some cash at settlement to cover the balance of the liens, settlement costs, and your sales commission before they accept this offer.
Which lien holder is foreclosing? If it is the first, then the second and third might get wiped out at the foreclosure sale. It might be in their interests to settle their lien for less than the balance owed, but only if the property is upside down to begin with. Otherwise, with a lot of equity left in the property, the second lein holder could just show up at the auction and bid high enough to cover their lien. A higher bid will ensure that both the first and second are paid.