Considerations for settlement offer on 2nd Mortgage

[reallynervous]

We are wondering if this may be an option for us. We did not reaffirm our 1st or 2nd mortgage with our BK. I have been reading other posts, so I know I need to have a good solid idea of the value of our home. I am wondering if there is a general rule of thumb estimation to figure the costs associated with a foreclosure sale, as in a percentage of the expected selling price.

For example, if comparable homes in our area are selling for $140K, what might they expect to get from a foreclosure sale of our property.

Thanks in advance for any info you can provide.

[Pandora]

I'm not quite understanding the foreclosure question you're asking given your title states about settling the 2nd mortgage; however - if you're planning on trying to get the 2nd to settle and release the lien, people generally start at 5% and go upwards from there. If you're trying to base a % to settle off of the foreclosure amount - what would it matter at that point? The house will have been foreclosed upon.

If you're planning on staying & paying in hopes to get the 2nd lien released, then you dont want it to to go foreclosure.

[HHM]

I think I get what you are asking, you are asking "how much does it cost the bank to foreclose." So, I imagine your idea is that you want to figure out a comparative settlement amount.

The cost to foreclose isn't really calculated on a % of the homes value and there are several factors that go into the "hard costs." Lot's of numbers get bandied about. For the actual, hard legal costs to foreclose, I have heard $6-12K. But there are other costs that can push that number up to $50K (factor in insurance, reselling the property, etc).

In settling second mortgages, the first consideration is the value of the home. How much, if any equity is there in the 2nd mortgage. Avg settlements are 5-15% of the balance owed on the 2nd mortgage.

[reallynervous]

I apologize for not being more clear with my question.

Yes, HHM, that is generally what I was asking. I am trying to to get an idea of the costs associated with foreclosing on a property to try to determine the point where the 2nd mortgage holder would make more from a settlement than foreclosing and having to pay off the 1st.

While I need to do more research to be sure, I estimate our home could be sold for about $130K. We owe approx $105K on the 1st and $75K on the 2nd.

Thank you both for your replies.