Novice foreclosure question

[kurtyordy]

ok, my dad is looking at buying a foreclosure at the foreclosure auction.

I was always understanding it that if the first forecloses, it wipes out all junior liens so you get the property free and clear of the junior liens. i.e. second mortgages.

His attorney is telling him that if the second was not properly notified that he would get the property with the second still with it. There have been others issues in the past which have caused me to question his competency which is why I am bringing this to the real pros.

The prop is in PA.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Runum]

I can't speak about your state law. In Texas the auction does wipe out subordinate liens. It does not wipe out municipal, IRS, or Medical liens. I have not heard of your exception but it wouldn't surprise me.

If your uncle has not been to a foreclosure auction before it will be tough. Over here, there are many properties being auctioned at the same time. Each trustee will present properties there own way. One trustee may use the street address to describe the property, one may use the legal description, another may use property tax ID numbers. You need to know the trustees name and approximate time they will be there. They will not speak loud and will not enunciate. They speak very rapidly and very monotone. You have to be within about 5 feet to hear them. Each property is only up for bidding about 2-3 minutes MAX. You have a set amount of time (1 hour) to pay for your bid in cash or approved funds. If you can't pay they re-auction it off. It would be worthwhile to go to at least one auction just to get used to the pace and to scope it out. Good luck.:cheers:

 

[kurtyordy]

I can't speak about your state law. In Texas the auction does wipe out subordinate liens. It does not wipe out municipal, IRS, or Medical liens. I have not heard of your exception but it wouldn't surprise me.

If your uncle has not been to a foreclosure auction before it will be tough. Over here, there are many properties being auctioned at the same time. Each trustee will present properties there own way. One trustee may use the street address to describe the property, one may use the legal description, another may use property tax ID numbers. You need to know the trustees name and approximate time they will be there. They will not speak loud and will not enunciate. They speak very rapidly and very monotone. You have to be within about 5 feet to hear them. Each property is only up for bidding about 2-3 minutes MAX. You have a set amount of time (1 hour) to pay for your bid in cash or approved funds. If you can't pay they re-auction it off. It would be worthwhile to go to at least one auction just to get used to the pace and to scope it out. Good luck.:cheers:

Thanks. The style in PA is slightly different. The sheriff actually auctions each property one by one with the attorneys in the back of the room with their hand in the air until the banks obligation gets met. In most cases, the bank ends up getting the prop, but not always.

Does anyone else have any insight into the lien issue? Specifically the second lien surviving foreclosure due to misnotification?

 

[hatterasguy]

In CT it does not wipe out all the liens. Never, never, never bid on a foreclosure without first having your attorney do a title search. I know someone who learned this leason the hard way and it cost him $35k, to remove a mechanics lein.

In CT the banks attorney sits outside the house and the auction is on the front yard, usualy on Saturday from 10-12. They require a none refundable deposit of 10% if you win, and the rest of the funds pretty fast. Its actualy pretty informal, the bank sends in there bid and if anyone beats it they get it.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[kurtyordy]

In CT it does not wipe out all the liens. Never, never, never bid on a foreclosure without first having your attorney do a title search. I know someone who learned this leason the hard way and it cost him $35k, to remove a mechanics lein.

In CT the banks attorney sits outside the house and the auction is on the front yard, usualy on Saturday from 10-12. They require a none refundable deposit of 10% if you win, and the rest of the funds pretty fast. Its actualy pretty informal, the bank sends in there bid and if anyone beats it they get it.

thanks, I know there is a lien there. It is a second mort. for 80k. I always understood it that they would get wiped. Now I am doubting mysefl.

 

[hatterasguy]

Well they might, or they might not it depends on how much the first is worth. The second may buy the first out.

Like I have said above "little" mistakes in RE can often be worth $50k++. Have a good attorney do a title search, if they are not paying the mortgage they probably didn't pay anything else. Look for liens!

Just go in with your eyes wide open because if you bid and win your pretty much commited.


If the house is vacant you can go look at it, I know your not supposed to...but...

 

[bflash98]

ok, my dad is looking at buying a foreclosure at the foreclosure auction.

I was always understanding it that if the first forecloses, it wipes out all junior liens so you get the property free and clear of the junior liens. i.e. second mortgages.

His attorney is telling him that if the second was not properly notified that he would get the property with the second still with it. There have been others issues in the past which have caused me to question his competency which is why I am bringing this to the real pros.

The prop is in PA.

(All the below information pertains to Washington State)
I guess it could be true but I don't think they really have to notify the second mortgage holder. The foreclosure notice is always to the people on the deed and then the public notice requirement.

In washington state the First lien wipes out all of the secondary liens. Tax, IRS, public utilities and HOA liens stays. A couple of things to remember HOA liens can only include 6 months worth of HOA dues though they will have a lien for a higher amount if you buy the place you will only be responsible for 6 months worth of the dues. I'm not sure about special assessments. The IRS encumbers the property with a lien but you do not have to pay for it. They have 90 days to deciede if they will buy the property from you for the price you paid and a little extra before their lein drops off. People who buy foreclosures for a living told me the IRS buys back about 1% of the time.

Any of the second lien holders can show up at the auction to bid on the property. The trustees starts the auction with a minimum bid (usually the loan amount plus fees though lately we have been seeing discounts). If no one bids than the property is taken back by the bank. If the bids get to a point where it would cover the 1st mortgage and the fees then the second lien holder would receive the rest of the sale amount.

In Washington State you have to have all of your money in cashiers checks at the auction. There are some Hard Money lenders who will loan you 75% of the purchase price for 1% per month interest and 3 to 4 points with a loan due date of 9 months.

I have spent a lot of time looking at the foreclosure market but the prices are still pretty high since you can't really cash flow anything up here. I have bid on a couple of places but have not been successful yet.

Hope this helps

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.