What to expect at Sheriff Sale if modified loan is underwater?

Question

I'm new to all this, but what if it looks like the loan was modified and then defaulted on? What is bank bidding protocol (in Cleveland area)? It seems most cases are bought back by the Plaintiff bank. Could there be any FNMA involvement? I was looking at a past case in the same town and saw that FNMA bought the property at the full appraised value, and the minimum bid is only 2/3 of the appraised value here. I'd like to buy my first home at a particular sale, but am trying to figure out if I would be wasting my time attending the Sheriff sale. Thanks!

Also, what implications are there if the owner filed chapter 7? Would there be a high chance of other liens that may still be tied to the title then? And why would an HOA be named as a defendent?

Also, what implications are there if the owner filed chapter 7?  Would there be a high chance of other liens that may still be tied to the title then?  And why would an HOA be named as a defendent?

Timothy Murphy III · Answer

@Cin Ng

I didn't read the statute you posted, but you are most likely not correct. Property tax liens take priority over even pre-existing first position mortgages. If the mortgage holder forecloses, any delinquent property taxes will still be attached to the property.

Now if it were a tax lien foreclosure, that would be much a stronger indicator that all liens were wiped out.

Timothy Murphy III · Answer

The foreclosure and sheriff sale should extinguish any liens junior to the one that's being foreclosed. You want to make sure you understand how to perform your own title search (or better yet, have a competent RE attorney or title company do one for you) to make sure you're not buying something with existing liens.

I assume the HOA would have been named as a defendant because they placed a lien on the property for unpaid HOA fees / assessments. Any individual or entity with an interest in the property must be named in the foreclosure suit, including junior liens that the plaintiff is seeking to extinguish via foreclosure.

Scott W. · Answer

hoa's survive so do mechanic liens and property taxes.

Darron Stewart · Answer

@Cin Ng

Have recently taken title to property that I held lien on, paid off junior tax lien holders and found out the bank just didnt want to deal with forclosing, repairing, then selling since owner had paid majority of loan, they chose to just let it go to me!!!

Jay Hinrichs · Answer

@Cin Ng   federal tax liens sunset after a short period of time I personally never let those bother me.. if your a true cash buyer.. now if you need to refi right away this is an issue.

I have never had IRS redeem and if they did they owe you statory interest.. but if you rehab the house past what is necessary for health and safety they don't have to give you those dollars back..

the real crux of the matter is if your honing in on ONE property the chances of that ONE property actually going to sale are not that great. those in the business track ALL sales in a particular county and will go to the sale with the mind set that they may get one of the 20 that are going that day.

IT is very rare that a homeowner looking for a particular home they like in a particular school district extra acutally can track and buy a home. .  for myriad of reasons.

1. pre foreclosure investor gets to them before sale and buys

2. BK that goes on for ever and you need a home

3. opening bid way to high its no deal.

4. stars all align kind of like the event of a water landing in a commercial jet.. then you get out bid.

good luck

Cin Ng · Answer

Am I correct in interpreting the following as property taxes not being an issue after the sale?

323.47 Lien on land to be discharged out of proceeds of sale.

(A) If land held by tenants in common is sold upon proceedings in partition, or taken by the election of any of the parties to such proceedings, or real estate is sold by administrators, executors, guardians, or trustees, the court shall order that the taxes, penalties, and assessments then due and payable, and interest on those taxes, penalties, and assessments, that are or will be a lien on such land or real estate at the time the deed is transferred following the sale, be discharged out of the proceeds of such sale or election. For purposes of determining such amount, the county treasurer shall estimate the amount of taxes, assessments, interest, and penalties that will be payable at the time the deed of the property is transferred to the purchaser. If the county treasurer's estimate exceeds the amount of taxes, assessments, interest, and penalties actually payable when the deed is transferred to the purchaser, the officer who conducted the sale shall refund to the purchaser the difference between the estimate and the amount actually payable. If the amount of taxes, assessments, interest, and penalties actually payable when the deed is transferred to the purchaser exceeds the county treasurer's estimate, the officer shall certify the amount of the excess to the treasurer, who shall enter that amount on the real and public utility property tax duplicate opposite the property; the amount of the excess shall be payable at the next succeeding date prescribed for payment of taxes in section 323.12 of the Revised Code.

Wayne Brooks · Answer

Property taxes are Not junior.  Sit down with a local RE attorney, to see what may remain...here, HOA liens survive.  As to what price the bank will set, it's a total crap shoot.  You don't care about loan mod.s or BK's, they don't affect you.

Cin Ng · Answer

According to county court records, the plaintiff is the first lienholder, but I was told that there could still be other rare cases such as mechanic's liens or federal tax liens.  Is there a way to research this without a title company/lawyer?  According to county records and the sale documents, there are no junior liens such as real estate taxes.

Nick L. · Answer

Generally speaking, a plaintiff can bid any amount up to the amount owed. Depending on the circumstances they may bid the full amount they are owed or a lesser amount. In my area you can call the plaintiff's attorney the day before the sale to find out what the bid will be.

Filing bankruptcy would normally prevent a sheriff's sale for the period of the bankruptcy.

The plaintiff's lien is *usually* in first position but there are no guarantees. The plaintiff names all known junior liens, such as HOAs, as part of the notification process to wipe them out. You should have a title company perform a preliminary title search, AKA search & hold, to make sure there are no superior liens to the one that is foreclosing.

What to expect at Sheriff Sale if modified loan is underwater?

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