House Sale less Than 2nd Mortgage + Property Tax Issues

[PoorInCA]

I am 4 years into my California Chapter 13 which includes a 2nd mortgage lien strip. My house has appraised at $380K with my first mortgage at $410k. I have someone who would like to buy my house - cash - and would pay enough to cover the 1st mortgage. Is this allowed? What would happen to the 2nd mortgage of $44k? I also owe about $20k in property taxes - what happens to those? I qualified for a 7, but went 13 to strip the lien. My first is with Bank of America and 2nd is Wells Fargo.

Thx!!!!

[dmc-2008]

I can't answer this but very interested in the answer!

[LadyInTheRed]

If the house is sold, the property tax gets paid before any mortgage. So the sale price has to be enough to cover the tax lien and at least the 1st mortgage.

You have to complete the plan in order to strip the 2nd lien. So, I'm not sure how a sale would work during your plan. I wonder if the court can order the lien removed early to allow the sale. In any case, you need court approval to sell the house. So, talk to your attorney to find out if a sale is possible. I'm curious about the answer too. So, please let us know what happens.

[justbroke]

Quite simply, if it's less than the value of the first and second mortgage (and any other encumbrances such as tax liens), then it is a short sale. You would need approval from the affected creditors if you were to do a short sale.

As stated, the lien strip is not effective until the case is discharged, so the balance owed on the home is actually growing (because the 2nd still accrues interest since you are not paying it... this is why you want to finish the Chapter 13). Now, having wrote that, you may be able to negotiate a short sale with the creditors.