This one can really cause you problems for no other reason then you did not do the numbers first. Do NOT send a short sale package to the 1st lien holder if they are not going to be shorted a payoff during the sale. And yes this happens even in my market where values dropped by 50%. Make certain you know the estimated payoff for each loan. Then run your CMA and put together a well thought out net sheet to see the numbers. What I mean be well thought out is go ahead in your net sheet and assume worse case scenarios like 3% seller concessions, projecting out 6 months or real estate taxes, association fees, etc.
Now when you have completed the above look to see if there is enough to pay off the first. If there is do NOT send them a short sale package. In this scenario you are only shorting the 2nd and only the 2nd needs a short sale offer. Sending a short sale package to the 1st causes problems and confusion on all ends.
Negotiation considerations:
How much extra money was there? Offer less to the second than is available as they will almost always counter higher. Leave room to come UP to their number. But in the end if they accept the original low ball offer understand you must pay them the real surplus at closing.
Be careful when deciding the 1st is NOT a short sale. Have you calculated in any past due payments, late fees and possibly attorney fees? How close is it? If you are very close to the payoff for the first always keep in mind that any delays, hiccups, counter offers or missed fees can quickly bounce you into a short sale.
In summary – Pay Attention! This is not something to be looked at quickly and assumptions made on numbers. If you are assumptive and dismissive of this responsibility you may lose this negotiation for your home owners.
