Do Not Be Intimidated by Multiple Mortgages

One of the main reasons I started all this stuff with the Short Sales and the “Manifesto” was because there was sooo much bad information out there. Besides the bad information, there were people selling $5,000 “bootcamps” that promised to teach you everything about Short Sales.

Let me tell you a quick story. I was invited to attend a free three hour Short Sale class that was being put on by a Title Company. I use this Title Company for most of my deals and they understand what I do as an investor.

The guy teaching the seminar was one of the Title Company’s attorneys from an office in another part of the state. His very general information was about 85% correct, his specific knowledge about the Short Sale course of action was, well to put it bluntly, it sucked!

It was pretty obvious that this guy had never completed one from start to finish, but knew the general knowledge about how Short Sales work from a legal point of view. In all fairness though, he only had three hours, but when the question and answer time came, he was nevertheless not giving out the same advice I would have.

I’m sure it helped some people get a better general knowledge about Short Sales, but it did nothing for them in a specific way. One answer to the many questions was just so opposite to what I teach, I want to proportion it with you.

The question was about working on similarities with a second or multiple mortgages. I know you have seen these similarities; they are financed with 80/20 financing. 80% first mortgage with a 20% second mortgage and the character owner may already be upside down.

The attorney’s advice was to pass on these because it would be hard to get both lenders to approve the Short Sale and it was twice as much work. He was half right about the additional work, but he was dead wrong about the second mortgage holder not being motivated to work a Short Sale.

I look for these types of similarities when I am looking to work a Short Sale as an investor. I like multiple mortgages. If there was one mortgage I would be gathering the same information for the Short Sale package anyway. So making an additional copy of it is no big deal. If you factor in the additional time on the phone, well that might be another consideration too.

There has only been maybe two times when I was stopped by a second mortgage holder who was determined to have the house foreclosed. For the most part the fastest and easiest discounts I have received have come from second mortgage holders. Most know and understand how poor their position is in the deal and will not put up too much of a fight.

The largest second mortgage I ever got discounted was on a house in Sweetwater Club in Longwood Florida. The second mortgage holder agreed to take $15,000 for a $342,000 loan. The smallest was when a second mortgage holder agreed to take $50 for a $5,000 loan.

Did it take me more time and energy to deal with two lenders at the same time? Of course it did, but when you have a first mortgage holder who is willing to discount maybe an 80% loan and you are able to get the second mortgage holder to take pennies on the dollar, you have just produced some equity if you are an investor. If you are working this deal for a client, you have just lowered the price of the character and brought more possible buyers into the game.

I know this article is a little long, but this is an important subject. Do not be intimidated by similarities with multiple mortgages or already liens and judgments, they all have the possible of being negotiated.

I do hope this has been helpful. Lesson one, make sure the person you are getting your information knows what they are talking about. Lesson two; do not run away from similarities with multiple mortgages.


Clyde R. Goulet

National Short Sale Expert

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