Active Rain July 30, 2010

Do You Want a $30,000 Problem or a $350,000 Problem?

Did you know that sometimes, despite our best efforts, lenders in a short sale will want the borrower to pay some money back? For example, if you have a $300,000 house with $315,000 on the first mortgage and $75,000 on the second, that the second mortgage might only release in the lien in exchange for a promissory note, unsecured terms, or cash settlement? We’ve had this happen to clients before, and while it is unfortunate, sometimes we can’t get the lender to change their mind. They might feel there isn’t adequate hardship. They might play “hardball.” It doesn’t matter. Some lenders want more money. 

If you have an approved short sale on the table with terms that require cash or a payment plan of money after the closing, and you have an auction date set for 3 weeks away, and the numbers resemble the above example, you have to choose your poison. You can close and have payments of $180 per month for another 15 years, or you can play hardball yourself and get foreclosed on, with your rear end out the window for $315,000, all back payments and interest, and legal fees. 

Let’s see: A choice between a $30,000 unsecured loan (which you might be able to renegotiate) or a foreclosure for an estimated $350,000. What makes more sense? Hmmm. Which would you choose…