Foreclosure - Second Mortgage

[Joseph Glazer]

Just trying to make sure I understand the mechanics of a foreclosure auction when the holder of the 2nd mortgage is the one foreclosing. Assume the following facts - 1st mortgage with $150K principal remaining and a 2nd mortgage with $50K principal remaining. The holder of the 2nd mortgage forecloses and the property goes to sherriff sale. Assume that the holder of the second mortgage has an upset price of $60K, so that is the maximum he will bid at auction. If I were to bid $61K and win the auction, my understanding is that I own the property subject to the 1st mortgage. I can then payoff the 1st mortage and I will own the property free and clear (assuming their are no other liens or debts that are attached to the property). Am i correct or am I missing something? Thanks for any insight.

[John Slater]

@Joseph Glazer you are correct on the ownership side of things.  The challenge is this.  You own the property and the previous owner is still responsible for the first loan, of which they are likely not paying as there's no point anymore.  In my experience speaking with the 1st lender can be a challenge though to get the payoff information.  It's a great strategy but with risks and potentially dealing with the old owner, "cash for keys and help to pay off the first" might be needed...