When the primary authorizes a short sale they will dictate the terms of authorization. Primaries are not very happy when those terms change. That is, if they take a 200k haircut, they would not be happy at all seeing a second receive 45k and thus would probably not authorize the sale. Thus if the payment to the second is on the HUD the primary would not be happy and could effectively kill the deal when they review the HUD.
NOTE that with short sales, even after your loan has funded the short sale lender reviews the final HUD.
I have seen cases in the past where buyers have made direct payments to second lien holders, outside escrow, in order to get them to release their lien. Again, it was done this way in order to skirt the first. It is not something I advocated but it was what the buyers were told they needed to do to get it done. In many cases the buyers did not do it, but I know of 2 cases where they did do it and it all worked out for them.
This was really dicey.
So here is what my speculation is for this case… note it is pure speculation and based only on what the op has given us.
I think this was an intended middleman flip that went sour. Blue Anchor may have been the original buyer or at least knew who the original buyer was. The original buyer probably had a cash deal for 371k for the primary lien holder. In order to secure that deal Blue Anchor probably stated that no monies would go to the second. In order to get the first deal done, on the day of closing Blue Anchor pays the 371 in cash to the first and then covers some amount to pay off the second. That same day the 450+ from the buyer is funded and pays Blue Anchor back.
Now somehow things went south somewhere. Perhaps the original investor couldn’t come up with the 371k or something like that. This actually could have been a great windfall for the buyer because he could have gotten the home for 371k plus the 45k. I would imagine that the second lien payoff arrangement (not payoff amount) was much less then 45k but of course Blue Anchor wanted a cut.
If you want to make demands about title companies to use and other contingencies then do not participate in a short sale.[/quote]
I agree that the OP’s transaction COULD have been a middleman flip gone sour. I agree that the second lien payoff was certainly less than $45K … much less. However, I don’t see where there is money from that $45K for Blue Anchor to get a “cut” over about a 1.5% charge for their “services” unless SELLER kicks in for closing costs and/or his broker commission.
This particular buyer (the OP) HAD to demand a vacancy contingency and to a lesser extent, an approval of an engineering report contingency, IMO. Although the property is situated across the street from a handful (a dozen?) well-known lots with deciduous soil and heavily offset cracked slabs, there has also been some rear lot slide damage and settled foundations on Chocolate Cliff (above) in past decades.
I believe this lot alone (with the flood channel easement in place) would be worth $250-$300K if vacant. This is due to the fact that it is slightly oversized and in an “exclusive” area.
If this buyer had deeper pockets (poss ~$100K to spend on the property after COE), he could play games with seller’s holdover tenants for months and mitigate or fix any structural problems he found after COE (ESP if he received the property for $371K). A tenant-occupied short sale, esp one where the seller is residing out of the country and the tenants are running an established business within it, would be PERILOUS for a FTB to deal with if the tenants remained there at COE, IMHO. As would any undisclosed drainage or structural problems.
Although the MLS aggregators are stating seller purchased this property in 2004, I found no grant deed to indicate a sale occurred on this property in that year. I haven’t looked at the documents but it is possible that an interspousal transfer deed for this property was filed on 5/10/04. THIS particular seller and two adjacent neighbors were forced to grant strips of their land (easements) to the county for a flood control channel in 1992, after county began proceedings to take it over in 1990.
The channel is visible from the street and extends from the back of this lot up the hill on the left, facing the property from the street.
Without examining the documents myself, I feel this particular seller (age 67) was an original owner (1978) or purchased the property on 2/23/82. (Electronic records prior to 1982 are not avail with the SD Co Recorder.)
If the OP’s broker was using a reputable CA title company, there is no reason for him to insist on using his own. I put the service selection contingency in just in case seller’s broker had selected what I would consider to be a “flaky” title company. Yes, they are around.
