Q&A: Selling Your House as a Short Sale with Two Lenders - YouTube

Selling your house as a short sale is never going to be a fun process. Selling your house as a short sale with two lenders could be an absolute nightmare.

And unfortunately, that’s the situation that today's person who sent me a question is facing.

I'm Ilyce Glink. Here's today's daily update.

So this is the question I got:

“If someone has a mortgage with one bank, and a home equity line of credit with another, how exactly do the negotiations work if you find yourself facing a short sale?

"Since I have a mortgage and home equity loan with different lenders, I want to have a better understanding of the process before I pick up the phone and tell them that I need to execute a short sale.

"And what happens if one of them agrees to the short sale and the other one doesn’t?”

Ah, ooh, I thought we were done with all of these questions.

But the truth is there are a whole lot of people who are still in a short sale situation. They're kind of congregated around different municipalities, but they're out there and they've got tough times ahead.

And I wish I had better news, because when you've got 2 lenders - and believe me some people have as many as 10 lenders - you're probably in for a real headache.

Here’s what to think about:

First, your situation is going to be complicated, no matter what you do. Especially if the two lenders disagree about the true value of your property and what needs to be done to dispose of it.

Further complications are going to arise if the second lender wants more money than it may get if the property is foreclosed on by the primary lender.

Each bank is going to require that you get its approval for the short sale. So that's a whole separate process.

This application process - you have to apply for a short sale - can be more tedious than the original loan application you went through when you originally got the loans.

Many of the big box lenders have an automated system for approving short sales, and it can function through an online portal where documents are uploaded and the application is submitted.

Now, there's a 30 day window where the lender is supposed to respond to you. They're legally requried to respond in 30 days, but I will tell you from my mail that doesn't always happen.

Once you get the process going, each lender will have its own agenda, and if their agenda is different, you may not get the short sale approved by either or both lenders.

So for example, your first lender may approve the sale but only if they get all the money from the sale.

The equity lender, which is your second lender, may then refuse to approve the sale unless they too get some of the money.

Right? What's the incentive for them?

If you can’t get the second lender to agree, it will be impossible to get the sale finalized.

Now, while the government has actually stepped up efforts to encourage equity, or second lenders in some situations to release their debt,

these lenders may still try to get more money, and others may not participate in the government programs and other government programs have already expired.

Given the many variables, the short sale process with multiple lenders is hands down one of the hardest transactions to complete.

And I do not think you can do it alone.

I recommend you find a really good real estate attorney or real estate agent with expertise in short sales to work with who has ample experience.

It would be even better if these people had previously closed successfully short sale transactions with your primary and equity lenders.

And that's because there are usually one or two point people in a whole metropolitan area who handle the short sales for a particular lender.

So if you've gotten to know them through that process with a different client, right if your agent has or your real estate attorney has, it's going to go a whole lot better for you.

Now, while it’s generally better to sell your home through a short sale,

if you can’t go that route and have not been making your payments to the lenders, the primary lender can proceed to foreclose on your house.

But before giving it up, you want to see if you can find a buyer and get your current lenders to work with you to get the home sold.

Now here's a final thought:

Throughout the housing crisis, many attorneys have made claims promising home sellers that they could get lenders to work faster through the short sale process and ultimately get you more money.

Yeah. In some cases, these attorneys and short sale lender helpers - notice we said lender helpers - asked for an amount of cash upfront, like 3 grand, but then were not able to produce any results.

So here's what you have to be aware of: If someone tries to give you that pitch, you've just got to move on and find a different attorney. Don't waste any time.

You can ask them "do you charge up front fees?" and if they say yes, you say "how much?" and if they say "$3,500" you're like "mmmm, yeah, I don't think so."

You can get a really good referral to a real estate attorney who's the right attorney from your local or state Bar Association

or you can go through your real estate agent to see if they are working with somebody on a regular basis.

Whatever you do, don't prepay for this. If you take nothing else away from this video, remember that.

I'm Ilyce Glink. If you want to learn more about investing in real estate, check out my intentional investors series: How to be Wildly Successful in Real Estate.

You can find it at my website: thinkglinkstore.com. I have a special discount code: "buy now". It will give you substantial savings.

And be sure to visit my website and sign up for my free weekly newsletter and you'll see that I'm working to rebuild America, one house at a time.