It is not uncommon for home owners that are facing a short sale situation to have more than one lien on their property. The second lien holder may approve the short sale of a property but may not necessarily forgive or cancel the debt still owed and require the home owner sign a promissory note at closing promising to pay off the remaining debt. In other words, the lien is released from the home in order to proceed with a short sale but the individual is still held responsible to pay it after the short sale is completed.
Whether the seller has to sign a promissory note, depends on the bank and what type of lien is in second position. In the situation a home owner does not agree to sign a promissory note for the second lien holder, the short sale cannot be completed unless the second lien holder agrees to cancel the remaining debt.
It is important to communicate with the second lien holder to find out if a promissory will be required in the early stages of a short sale transaction, if possible. Many times, payment plans can be modified so they are manageable for the individual.
In some situations, the second lien holder will not approve a short sale if the borrower is not current with their payments. Short sale transactions are more complicated when there two or more lien holders involved therefore, it is important to hire a real estate agent in Colorado Springs who has experience with these types of short sales.
Additional Reading: Short Sales: Will you have to pay the Phantom Tax?
Colorado Springs Real Estate Agent, Patricia Beck, providing real estate services to home sellers.