I’ll have a second lien with the 1st mortgage please

Short sales are currently playing a big part in the recently-strong housing market. In the first quarter of 2012 there were over 133,000 short sales, the highest number in three years. This is a much better and less costly alternative to foreclosure and a good portion of the distressed inventory pipeline is being worked through via this mechanism. 

An interesting point  is that 39 percent of homes that enter foreclosure have a second lien yet only 4 percent of short sales completed in the second quarter had a second mortgage according to RealtyTrac. Part of this has to do with the legal barriers of selling a home if there are two or more liens placed on the property. Short sales also contribute to the fall in foreclosure sales since many properties are exiting the market via the short sale mechanism.

How deep are underwater homes with second mortgage?

Most of the 11 million underwater homeowners continue to pay their mortgage as agreed. Yet there is a big difference between someone that bought a home for $100,000 and is now valued at $90,000 and someone that bought a $500,000 home now valued at $200,000. Markets like South Florida have many homeowners that are incredibly upside-down and really have no way out other than a short sale or foreclosure.

Let us take a look at the data on underwater homes between single-mortgage homes and those with second-liens:

The average negative equity for single-mortgage homes (nationally) is $47,000 while that of homes with second-mortgages is over $80,000.  What has occurred is that short sales with single-mortgages have been making up the bulk of the short sale action but action on homes with second-liens continues to drag out (because most agents and those negotiating these short sales are not experienced nor committed enough to get this type of short sale through). Typically, the more likely event for many of these homes is going to be through the foreclosure process which is roughly 15 percent more costly to the lien holder (and eventually the borrower) than via the short sale route.

However, we have had tremendous success negotiating short sales with two liens. This type of short sale is not for the inexperienced agent or for some agent who just takes a listing and hands the rest of the responsibilities off to some title company of paralegal.

If you think that a short sale may be the way for you to go…whether you have one lien or two, give me a call, directly (and confidentially) at 561.602.1258

 

Thanks for reading…Steve Jackson