Be sure to file short sale applications with all lenders (the first and all subordinate lenders). Obviously, the short sale package goes to the first lender, but if there is a second lender (2nd Deed of Trust, Home Equity Loan or Line of Credit) they also need a complete package.
Even if the first lender may be paid in full, I would still recommend that a complete package be sent to both the first and second lender. The second lender may demand more money, which could result in the first agreeing to a short fall. Because each negotiation may be different, it’s better to be safe than sorry—all lenders should get the short sale package.
Also remember that a home equity loan or line of credit is still a lien on the property. Sometimes the Seller does not understand that a home equity loan is still a mortgage. A good practice tip is to ask the Seller at the listing to provide copies of all payoffs to show the status of each loan. A second tip (previously in Tip 6-2010) is to order an early title search for the Seller to be sure that all outstanding liens (including judgments) are handled and negotiated with the short sale lender.
Please contact us if you have questions or need legal advice.
Tucker Griffin Barnes P.C.