Payoff First And Short Second?
I need some advice. I have a lead on a house in forclosure with the following specs:
1st: 145000
2nd: 35000
Appraised value: 225000
There is obviously a lot of equity here -- there's no chance of shorting the senior note, which is the one that is foreclosing.
My question: Could I payoff the first and short the second? Obviously, if it goes to the steps the second note holder will get nothing. How would I approach this type of scenario? How do I approach the secondary lender, when they know that there is significant equity in the property?
Any thoughts from the gallery would be greatly appreciated.
Also, what would you suggest I get the seller to sign in the mean time to tie up the deal and make it easier going forward?
You approach the 2nd just as you would with any other mortgage. Give them a convincing proposal. Obviously they are modivated as their interest will be released--unless they plan to bid at the sale.
"Obviously, if it goes to the steps the second note holder will get nothing. "
That is a flawed assumption....
hi, this whole first and second mortgage is confusing me. would the first mortage be the house and the second be a home equity loan? i have never done this, so when you get a second mortgage, is this just tacked onto the end of the original mortgage so your payment goes up? for example. i buy a house for 125k and 5 years later i want to refinance and its worth 150k so now the bank gives me 25k cash and i am now making a payment on 150k? is this right? ..thanks
In this case, the owner put together a "zero down" loan when they purchased the property. They borrowed 80% of the value on one note (the first mortgage) and 20% on another note (the second mortgage), and so was not required to put any cash down.
okay so know he has two differ. mortgage payments and mortgages all together? so in this case you have to short sale one of them and pay off the other?
Well I don't know GA foreclosure proceedures intimately so you need to run this by an attny. to see if it works there.
What would you like to pay for the house? Figure out how much discount you'd like the second to take, go and offer to buy their note for the price that works for you.
Generally junior lien holders have the same rights to re-instate and/or redeem as the homeowner. So now your re-instate the first mortgage, foreclose on your second. Inthis way you maximize your leverage, and keep the deal off the general market (i.e. the sherrifs sale). Unfortunately you probably stretch out the process to acquire by several months so you have to be willing to be patient.