Would a short sale even be feasible with a second lien for solar debt?

Shauna; first, selling a home via short sale because of a $30,000 delta is crazy. Your credit will be ruined for years and you will not be able to purchase another home for several years. Second, the only way you will qualify for a short sale is if your financial situation has significantly changed for the worse. Just because you owe more than the home is worth does not mean you will automatically be granted a short sale approval. A financial hardship such as job loss, health issues, or significant pay reduction would be necessary for consideration. Keith Jean-Pierre Managing Principal The Dapper Agents Real Estate Operations in ALL 50 States

Yes, a short sale can still be possible even with a $30,000 solar-related second lien, but the key issue is what type of lien the solar financing actually is and whether it is recorded against the property. A short sale requires the lienholders to agree to accept less than what is owed in order to release their liens. The first mortgage lender will typically need to review the entire financial picture, while the solar lienholder may also need to approve the amount they will accept from the sale proceeds. Solar financing can be structured in different ways, so the title report and the actual solar loan/security documents are important. The lender will generally want documentation showing the homeowners’ financial hardship, current mortgage balance, solar loan balance, income, assets, monthly expenses, rental income and expenses, and the property’s current market value. They will also typically need a proposed purchase contract and a preliminary settlement statement showing how the sale proceeds would be distributed. Since this is an investment property that is being rented at a $1,000 monthly loss, documenting that negative cash flow and the circumstances surrounding the relocation may be important to the hardship review. The $30,000 second lien does not automatically make a short sale impossible, but it does add another party whose approval may be necessary. I would recommend contacting a short-sale specialist and having title/escrow identify exactly how the solar lien is recorded before determining the best strategy.

Shauna, a short sale can still be realistic with that solar lien, it just means a second negotiation. Every lienholder has to release before title can transfer, so your mortgage servicer and the solar lender both need to agree, and junior lienholders often accept a partial payoff to let a sale close. Step one is finding out how the solar debt is actually recorded, because some are true second liens while others are fixture filings tied to the panels themselves, and that changes who you negotiate with. Expect the servicer's loss mitigation team to ask for a hardship letter, pay stubs, tax returns, bank statements, and a market analysis of the home. A military relocation is a hardship they recognize, and renting at a $1,000 monthly loss belongs in that letter. I'm licensed in California, so have a Fayetteville agent who has closed short sales run your exact numbers. Alla Novytska, Realtor®, JohnHart Real Estate, DRE #02254775

Yes, a short sale can still be possible with a $30,000 solar lien, but the key question is whether the solar financing is actually recorded as a lien against the property and whether the first and second lienholders will agree to the payoff/release terms. Subordinate lienholders generally have to agree to release their lien for the sale to close. I would start by getting a preliminary title report and the current payoff statements for both the mortgage and solar financing. The first mortgage servicer will typically want documentation showing the financial hardship, property value, debts/liens, and the proposed purchase offer. Because you're a military family and the property is currently costing you about $1,000/month to carry, I would also document the relocation and ongoing financial burden when discussing the hardship with the servicer. One very important point: don't assume that getting the solar lien released automatically eliminates your personal obligation on the solar debt. You want written confirmation of exactly what happens to both the lien and any remaining debt after the short sale. Disclaimer: This is general real estate information, not legal, tax, mortgage, or financial advice. Short-sale rules vary depending on the loan investor, lien documents, state law, and the specific solar financing agreement. I would strongly recommend speaking with your mortgage servicer, a qualified short-sale professional, and an attorney or other qualified professional who can review the solar agreement before making any decisions. — Juan Picos, Realtor

Yes, a short sale can still be feasible with a $30,000 solar lien, but both lienholders would need to agree to the sale and how the proceeds are distributed. The mortgage lender will typically review your financial hardship, income and assets, mortgage statements, and other supporting documents. Since you’re relocating due to military service and currently renting the home at a loss, those circumstances may help support your case. I’d recommend speaking with an experienced short sale agent and attorney to review the solar lien and your specific options.

Shauna, yes, a short sale is realistic with a $30,000 second, but the answer turns almost entirely on something we do not know yet: what that solar debt actually is on title. Solar financing shows up three different ways, and they behave nothing alike in a short sale. The most common version, especially on 2018 through 2023 installs, is a solar loan secured by a UCC-1 fixture filing. That behaves like a junior lien, it shows up on the title search, and it has to be paid, released or negotiated down before anyone closes. The encouraging part is that solar lenders in a short sale tend to be pragmatic, because in a foreclosure they usually recover nothing at all. The second version is a lease or a power purchase agreement. That is not a lien on your house, it is a contract for the equipment, although the solar company may still have a UCC-1 filed to protect its panels. Here the buyer either assumes the agreement, which means credit-qualifying with the solar company, or you buy the contract out. This version kills more deals through timing than through money, because solar transfer departments are slow and short sale approvals expire. The third version is a PACE assessment, and this is the hard one. PACE rides on the property tax bill, it sits senior to your mortgage rather than junior to it, and it transfers with the property automatically. It generally cannot be stripped in a short sale the way a junior lien can. So before you talk to anyone about listing, do two things: order a preliminary title report and dig out your original solar contract. Which of those three you have decides your entire strategy. And whatever ends up getting paid off, confirm that a UCC-3 termination actually gets filed, because stale UCC-1 filings that were never released hold up closings constantly, sometimes years later. If this is a VA loan, ask your servicer specifically about a VA compromise sale rather than a generic short sale. A PCS relocation is a recognized hardship, the VA pays the servicer part of the shortfall under the guaranty, it resolves faster than a foreclosure, and your entitlement may be partially restorable afterward. Use the words compromise sale on the phone, because a front-line servicing rep will not always volunteer it, and be ready for them to want other loss mitigation options ruled out first. Here is what the first lienholder will want from you: a hardship letter that tells the relocation story plainly, two years of tax returns, recent pay stubs and your LES, bank statements, the current lease showing the roughly $1,000 monthly shortfall, a signed listing agreement, an arm's length offer, and a draft settlement statement showing the lender nets more from your sale than it would from a foreclosure. That last document is the one that actually moves approvals, so make sure whoever lists it knows how to build it. Two things most short sale answers skip, and both matter in your situation. Because you rented the house out, it is an investment property now, not your principal residence. That changes how forgiven debt gets treated, since the exclusion for qualified principal residence indebtedness generally will not reach you, and it changes how a loss on the sale is handled. Ask a CPA about the insolvency exclusion under Section 108 before you sign a short sale approval, not after a 1099-C shows up in January. And get the deficiency language right on both liens, not just the first. The first lender usually ends up satisfied, so the party most likely to chase you afterward is the solar lender sitting in second position. Do not accept an approval letter that merely releases a lien. You want it to state that the debt is settled in full and that the lienholder waives its right to pursue a deficiency, in writing, from both parties. I am a real estate professional, not an attorney or a CPA, and short sale outcomes live or die on the exact language in the approval letters, so please have someone review them before you sign. I work Palos Verdes and the South Bay here in Los Angeles, so Fayetteville is not my market, but I would gladly help you find an agent there who has genuinely closed military short sales, ideally one with the MRP designation and real solar lien experience. That combination is rarer than it sounds and it is worth interviewing three people to find it. I am Zoltan Peresztegi, and I am happy to be a second set of eyes on anything a servicer sends you. Zoltan