A short sale is a sale of real estate in which the proceeds sale will fall short of the debt owned against the property and the property owner cannot afford to repay the liens’ full amounts. In a short sale, the bank agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency.

In California, any short sale agreements for the second or the first require the bank to hold the seller of a primary residence harmless.

What is the difference between a Short Sale, Loan Modification and Lien Elimination?

What is the difference between a Short Sale, Loan Modification and Lien Elimination?

Short Sale

Simply put, a short sale is when a homeowner engages a REALTOR or Short Sale Negotiator to sell their entire property short of what they owe on the mortgage. When a short sale occurs the title is transferred to a new buyer.

Loan Modification

What is the difference between a Short Sale, Loan Modification and Lien Elimination?

What is the difference between a Short Sale, Loan Modification and Lien Elimination?

Through this process, the homeowner and the bank renegotiate the terms of the mortgage loan. In some cases, the bank will offer a new interest rate and extend the monthly payments. The bank still gets their interest and you increase the length of time you are locked into the home. In some cases, the bank will theoretically decrease the actual principal. This is extremely rare.

By the way, bumping a negative amortization loan with a 1 or 2% interest rates up to the current interest rate will potentially double the monthly payments. So there is no modifying a negative amortization loan. It just doesn’t work out.

Lien Elimination

Settling Short your 2nd or junior mortgage lien is when a homeowner engages a negotiator to offer the bank a short settlement on what is owed on that 2nd note or lien. This requires that the appraised value of the home is less than the amount owned on both loans.

Why Lien Elimination?

Lien elimination reduces a good chunk of your total monthly mortgage payment and gets your mortgage closer if not under what the property is worth in value. Lien elimination might free you up for a refinance of the 1st or to even sell the property and move onto something else.

If you are caught up in the endless spiral of a negative amortization loan, lien elimination could be your rescue.

Image: FreeDigitalPhotos.net

I am a licensed Santa Cruz Realtor, Senior Short Negotiator and Lien Elimination Specialist with an additional ten years’ experience as a Senior Mortgage Banker. My intention is to make a real difference for homeowners. If you think I may be able to help you through lien elimination, contact me for a free phone consultation. Let’s put you back in control of your financial life.


Ellen Carter, Directions Real Estate
Ellen Carter
REALTOR | Senior Short Sale Negotiator | Mortgage Lien Elimination Specialist
Directions Real Estate(831) 345-1381 Cell
(866) 446-3142 Fax
DRE # 01417614
Mortgage Lien Elimination

Mortgage Lien Elimination Solution: Putting You Back In Control of Your Financial Life

Mortgage Lien EliminationThe present day market mess created by the banking industry has left homeowners and their collateral—their home—in a devalued state. After negotiating 50 short sales a year, year after year, my frustration grew. While a short sale might be the best debt-relieving decision for some homeowners, it is not the only foreclosure alternative possible. As a real estate professional, I wanted a tangible solution for homeowners to keep their homes.

Mortgage Lien Elimination Solution

Homeowners with a first and a second mortgage on a primary residence whose property is underwater are not able to refinance to a lower interest rate. They cannot take advantage of the historic low interest rates of the market today to reduce their monthly payments and are trapped because of property value reduction in current home loans with ever increasing interest rates.

Out of my mortgage banking and short sale negotiation experience, I created a solution for homeowners: lower monthly payments through a Lien Elimination Solution.

What is Lien Elimination?

Lien elimination, sometimes referred to as lien stripping, refers to the process of reducing or removing the 2nd or junior lien on the property.

As the real estate market value of homes continue to fall in many locations around the country, homeowners are left with mortgages that far exceed the current fair market value of their homes. If the value of the home is worth less than the note due on the first than the junior lien is unsecured.

For example, if $700,000 is owed on a 1st mortgage and $200,000 is due on a 2nd mortgage but the latest appraisal shows that the property is worth $638,000 the balance of the first mortgage, in this case $62,000, is deemed unsecured. The 2nd mortgage is definitively unsecured which leaves the 2nd lien holder (the mortgage bank) in a very serious situation.  If you are in this position with your primary residence, you are a candidate for mortgage lien elimination.

What is the Process Like?

The process of mortgage lien elimination is very much like a short sale as far as the documentation is concerned. Your licensed LE Specialist will make sure you order an appraisal from a licensed appraiser to confirm your eligibility. Then your LE Specialist will contact the bank to negotiate away your 2nd and/or junior lien.  The bank is informed of their unsecured loan, offered your documentation and the appraisal and then offered a percentage of the balance due. This amount of money in a mortgage lien elimination settlement is often more than they would get through a short sale or foreclosure and definitely more than they would receive in the event of the homeowner’s bankruptcy—when they would receive nothing.  The 2nd lien holder then reports to the three credit agencies that they have “settled short of what is owed.”

What Are The Gotchas?

Personally and professionally, I do not see any ‘gotchas’ in lien elimination.  After eliminating your 2nd lien, you have the possibility to either refinance your 1st lien at lower interest rate or continue to make the monthly payment on the remaining 1st mortgage. Either way, you have saved the family home.

How Will Lien Elimination Affect My Credit?

The 2nd lien holder/bank would report to the three credit agencies that they “settled short of what is owed.” Your credit would take a minimal hit for 3-6 months.  Since you are free of this 2nd mortgage payment you are freed up to make the payments on all of your other obligations: 1st mortgage, credit cards, car payment, etc. on time. This will help repair the minimal damage to your credit over time.

What Are The Tax Ramifications?

As a licensed REALTOR, I recommend meeting with your licensed CPA for information about tax ramifications. The elimination of your second lien would also eliminate any mortgage interest that you might be deducting from your personal gross income and taxes each year, so check with your CPA to see if mortgage lien elimination is the right choice for you.

What Are The Costs?

The out of pocket fee for this process is 10% of the amount owed on the eliminated loan. This amount includes the settlement with your bank.  If you have a $100,000 2nd lien, the total cost to eliminate it is $10,000 or 10¢ on the dollar.

I am a licensed Realtor, Senior Short Negotiator and Lien Elimination Specialist with an additional ten years’ experience as a Senior Mortgage Banker. My intention is to make a real difference for homeowners. If you think I may be able to help you through lien elimination, contact me for a free phone consultation. Let’s put you back in control of your financial life.

Ellen Carter, Directions Real Estate
Ellen Carter
REALTOR | Senior Short Sale Negotiator | Mortgage Lien Elimination Specialist
Directions Real Estate
(831) 345-1381 Cell
(866) 446-3142 Fax
DRE # 01417614

How to Negotiate a Real Estate Short Sale

Advice from a Sr. Short Sale Negotiator

I started doing short sale negotiations almost 4 years ago, before the banks and the state and local real estate associations had really begun to codify terms and requirements. I started because I saw that there was a need to help people out of debt and I realized that as a Realtor with my background in mortgage banking, I was uniquely qualified to try to help.

Since I have been around the short sale block longer than most people in my field, I get asked a lot of questions by my colleagues and I thought I would write about some of my thoughts and advice that have sprung from that.

The questions that I get the most have to do with contracts and payments. After several trials and tribulations, I find that the best way to ensure payment is through a strong contract. Make sure that your contract states that you will be paid for your short sale service at the completion of the bank approval and not at the close of escrow. Or, consider a laddered payment structure in case you are called upon to re-negotiate for a new buyer (or several new buyers.) I also suggest, when possible, to hook any repayment (from junior lien payoffs) or payment into the escrow so that you get paid by title.

My fellow Realtors also want to know how far I think they can push the bank. Negotiating with a bank is a confidence game that reminds me of a great blog called The Art of Manliness that offers a lesson in negotiating for a used car. Many of his used car lessons apply here:

  1. Knowledge is Power
    I think this is the most important rule when negotiating a short sale—know your client’s file! Never let the bank have the upper hand. Educate yourself about the lien-holding banks, monies owed, deficiencies and your client’s story. Interview and research extensively.

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    Image via Wikipedia

  2. Know How the Dealers (Banks) Make Their Money
    Remember that the banks insure against losses in several different ways, through the FDIC, through mortgage insurance and also through other government programs, not the least of which are TARP funds. So while they are taking a loss, a short sale is never as uncomfortable for them as it is for your clients, so negotiate accordingly.
  3. CarFax. (Property Inspection) Get One.
    Surprises are great, but not at close of escrow. Don’t let surprise disclosures foul up the deal. When possible, get your inspections done up front before you begin short sale negotiations, because this is an ‘as is’ sale.

Short Sale Sellers NOT Behind on Their Payments and NO Short Sale Approval – Retirement/Savings Gone? REALLY?

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Setup to a Question: When a homeowner cleans out his or her retirement, kids college fund and anything else they can get their hands on to pay their mortgage then still has to sell short and the Bank won’t agree to the short sale because the borrower is NOT behind on their payments, how is that right?

Their income decreased intensely during late 2007 & 2008 (Quick! Who’s income didn’t?) They used everything they could get their hands on to pay the mortgage to keep from going behind on their payments in order to preserve their credit. Now their retirement and/or savings are GONE! If the homeowner is in their early 50s, then when they are a young senior citizen some 12-15 years from now when Social Security & Medicare are things of the past—how will things look then?

Millions of people in their early 50’s (including me) are currently in this position and doing exactly this. Think about all of us, 15 years from now, with no retirement, no social security, no medicare and no credit. These are the ramifications that are being put into motion today by the banks. The banks, and you can find the list of the top 15 offenders on the FHFA‘s latest list for a start but there is plenty more, are forcing homeowners to go behind in their payments and ruin their credit and what is left of their dignity will result in a lot more problems down the road than these bank ever considered! (Big Surprise) And how about ALL of those kids in this next generation that are not going to college? Does our country have a chance of producing smarter leaders? Not bloody likely.

Let your voice be HEARD, people! I’m taking this as far as I can and hope you’ll chime in and tell me your story. Don’t be afraid—tell it—your actual future and that of your children depends on it!

I’ll be sending around a petition next week. My name is Ellen Carter, I am a Realtor & Senior Short Sale Negotiator and, yes folks, this is just the beginning from Ellen’s House.

The Short Sale Conversation Continued

In response to John Flaniken’s blog – The Short Sale Conversation that hit the ground running last Thursday night – Yeah John!

To find balance in a Real Estate career, and take the time to try to plan that balance in what you’d like your business to look like, while still have some semblance of a life at age 30 in this Real Estate market brings up quite an opportunity.  How much of your business do you want to be based in Short Sales, how much in REOs and how much as conventional sales?

Working on planning your thought process around how to create such balance in your work, based solely upon what is supported by studies and figures, that explain the pain so to speak, doesn’t give you too much of a choice. Short Sales are here to stay, at least the next 2-3 years and to not reel them into at least 50%-70% of your business is to cut yourself out of the market and to cut yourself off from making the difference for your clients and yourself, thereby leaving yourself out in the cold.

Not all Realtors are still in their 30s. Many of us have been establishing our business and personal lives for many years. Many of us have been through lay-offs for as much as several years, draining all finances. Additional opportunities to plan our business (in the minds of many at least) might not be as wide spread an opportunity.

In an effort to be fair to the Realtors and Brokers that do not have a mortgage banking background, which is the greater portion of the folks in the industry that we work in, I want to say–good on ya!–because taking on a short sale without knowing the intricacies of how to prep the package and approach the bank or get inside the head of an investor and how they can change the life of a homeowner with one swing of their axe on a note that’s gone bad…I wholeheartedly applaud you!

I don’t spend too much time around the water cooler, but I do work with a great many Realtors and Brokers who did not surf the tsunami of the mortgage meltdown and are just plain not prepared to handle today’s tough Short Sale transaction. The few Realtors, who have grown the stones it takes to take it to the wall, struggle and learn, in the guise of a trial by fire, if they can hang on through the next few years, they may create a size-able business for themselves. But they may also find themselves emotionally bankrupt.

I worked for ten years as a Senior Mortgage Banker and the last three years as a full time Realtor/Short Sale Negotiator, so speaking from some rather intense experience, you have to have either had x-ray vision to know what was coming at the beginning of 2007 (which none of us truly did) or have grown nerves of steel to survive the pain of the last two and a half years, working full time closing Short Sales, in order to have gained the type of experience it now takes to keep going, day after day. Closing Short Sales, one right after the other, is excruciating work, with some transactions taking months to close.

Without having the kind of financial background and experience it takes to be creative in making the number puzzle pieces fit together for a short sale transaction, left out in the cold might not really seem like such a bad thing. Although those agents who choose not to take on Short Sales may be feeling a different type of pain and that pain may show up in the form of lack of income.

Trying not to sound too flip, happily, there has been some education at the local Realtors boards. There are credentials to be obtained, like SFR Certification, for instance. The process of which is described on the CAR website as follows:

To receive the SFR Certification, you must complete the one day core course and successfully pass the exam, as well as view three 1-hour Webinars (available free of charge), and submit completed application ($175 application fee).

OK, so did you read that?

ONE day and 3 Webinars is all it takes to be credentialed as a Specialist! Oh yeah, I almost forgot, you get a SFR logo for your marketing is included!

The SFR certification sounds more like being thrown to the wolves while wearing a logo!  It’s a good attempt at giving the licensed Realtors and Brokers the tools they need, but it’s like going to therapy to discover why you are having such a tough time in life. You end up having to go for a couple of years, and now you know, but therapy never tells you what to do with the knowledge after you do know!

To the credit of Realtors and Brokers that have not worked in the financial lending arena, the financial aspects of Real Estate is something that they have always felt “should be handled by the client’s lender” and I hear that being said in the hallways and around that water cooler in my office to this day!

There is a choice to be made here with regards to taking on new clients or serving past clients. I still have my lender head and I generally attempt to put my clients first and my pipeline second–sometimes to my detriment.  These people, my Short Sale clients, are going through one of the hardest things they will ever go through (as are a good many of our brethren) and it’s important to also keep that in mind while also finding a way to balance your business and personal life.

Short Sales are not the type of transaction that can be taken lightly or that you can grow into overnight. It takes planning, experience and finesse. I’ll even cop to not always being the best at the finesse portion of the program, however I have negotiated my way through the greater portion of my 56 years and recognize it as one of my strongest skills. After completing over 200 Short Sale negotiations in the past three years, either my own listings or that of plenty of other Realtors and Brokers as their third party negotiator, I am fully aware that Short Sales are the greater portion of my business. It is a part of who I am and most of what I do. And I do it well.

I would be lying if I said that I have not felt like I had been flung up against the wall of frustration in the last few years, but have learned a few things. To get things done successfully from the onset, plan your end goal. In Short Sales, as in life, doing most of the work on the front end is the trick. And, especially in Short Sales, make sure to never let the bank be the driving force towards the end result.

My name is Ellen Carter. I am a Realtor and Senior Short Sale Negotiator and this is Ellen’s House.