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Short sale property has four liens, good grief!

Short sales can be highly challenging, particularly when tax liens are involved, but there are many options available to overcome the obstacles, even when they appear insurmountable.

short sale liens

short sale liens

Short sale with multiple tax liens

I just came across this short sale query; the listing agent seeks advice on her short sale transaction because she is at an impasse—after about 16 weeks of negotiating.

Here’s what she has to say:

4 Liens and No Cooperation

Short sale with four liens:
Bank of America first lien will only allow $734 to the second lien holder.
SLS (second) wants $1500.
One credit card from a debt collector for $2700.
One helicopter bill for a life flight (person is now deceased) for $3500.
The seller is supposed to receive a $5000 incentive from Bank of America.
The property is only valued at $38,000.
What should I do?

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Processing a short sale with multiple liens can be extremely challenging. That’s why it is always a good idea for short sale agents to work with the seller and the title company to determine existing liens at the time that the short sale listing is taken.

Sadly, there are certain short sale listings which should be avoided despite the fact that short sale listing agents often feel compelled to help each and every distressed borrower that they encounter. Short sale listings to avoid include those with an imminent foreclosure sale date, those with many liens, and those with sellers not interested in providing paperwork in a timely manner.

Understand Available Options

In the case of this short sale, the seller and the listing agent still have a few options available to them:

  1. The seller (who the listing agents states is destitute in a part of the inquiry not printed here) can contact a bankruptcy attorney and discuss bankruptcy as a mechanism of addressing the uncollected debts.
  2. The agent can work with the title company on items three and four. In certain parts of the United States, Title Insurance Companies with work with agents and collectors in order to clear uncollected debt from the title reports prior to closing.
  3. The seller can, with the permission of Bank of America, credit the entire $5000 towards the other liens, and those items can be paid off at closing (note that there will still be a small shortage).

When working short sales, there are always options available to short sale sellers in difficult and challenging situations. However, seeing a challenging short sale to the closing table can be very rewarding.

Many agents might argue that this challenging short sale (with a sales price of $38,000) is not worth negotiating, since the commission paid is quite small. That’s a tough call, and it’s not mine to make. But, it is vital that when an agent takes a short sale listing, he (or she) is 100% certain that they know what you are getting into and understand the liens that need to be addressed. Short sale listing agents need to be certain not to bit off more then can chew; they may want to think twice before they agree to negotiate short sales that may not be worth the time and effort.

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Written By

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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