How does a short sale work?If there is a 1st and 2nd mortgage, do they each agree to accept a certain amount of money to sell the house, are you then responsible for the balance of the mortgages?Can they put a judgment against you for the balance?

yes that is it in a nutshell. they accept less and you get a bill for the rest. even if it is forgiven you will get a 1099 for tax files that you will pay and they will most likely come after the rest in the future

1st & 2nd mortgages r named so because the 1st mortgage gets paid off first and, if there is anything left over, then the 2nd mortgage gets paid off. What this usually means in a declining market is the sales price is not enough for the 2nd mortgage to get paid off in full.

This is doubly true in a short sale so everything usually depends on the 2nd lender in a short sale. Both lenders have a sales price they will accept but the 2nd lender needs a higher sales price to come out OK.

Once a price is accepted by both lenders & the deal is closed, both lenders write off any remaining debt u owe. In other words, they do not come after u for the balance. That is the good news. The bad news is the IRS treats the forgiven debt as income & wants to tax u on it. Makes u wonder why they did not do away with that nasty surprise in the $700 billion bailout.