Question: What Happens in a Short Sale When You Have Two Loans?
A reader asks: "Our home is worth less than we owe against it. We have a first mortgage of $85,000 and a second mortgage of $55,000. Our agent says we won't get more than $85,000 if we try to sell it. What happens to the second loan in this instance?"
Answer: Doing a short sale is hard enough, quite frankly, but it's even harder when you have two loans -- it's twice the headache. I feel your pain. Because not only do you need the cooperation of the first lender, the second mortgage holder needs to release that loan as well.In your case, you owe $140,000 on a home that is worth $85,000. After paying off the first lender, you will still be short $55,000. Not to mention closing costs.
First, let's take a look at what happens in foreclosure:
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