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Short Sale from 2nd Position

Can you do a short sale from 2nd position? If so, what happens to the 1st mortgage? Do you have to make sure the payoff covers their lien?

Although the senior lender will always be paid before the junior lien, a short sale has to be negotiated & agreed upon by all lien holders. This makes short sales an excellent exit strategy for 2nd position (junior) lien-holders because they can essentially "hold home sales hostage" < Bloomberg's words not mine!)

So this is good news for the junior lender because the short sale can not be completed without approval. In other words, the senior lien will be forced to foreclose if the junior lien does not allow a discounted settlement. To avoid foreclosure, the senior lender will often offer a junior lien payoff of up to $12,000 - previously $6,500, even in a negative equity situation (per the HAFA Short Sale program).

More Advanced Resolutions training is available in the Foundation Series for Note Investor Network members - including an entire section on Short Sale as an exit strategy!