REOs where they owe more then property value

[Sam Leon]

There is a property on Hubzu I have been keeping an eye on.

Market value is around 135K by my own calculations and comps.

It is now owned by HSBC since October of 2013.

It was listing with a starting bid of 26K, now it is bidding up to 65K.

However, I went to the records and archives in the city, as well as code enforcement, and they have 13 separate violations and fines. Some of those are mickey mouse $300 here, $500 there overgrown grass, rotted soffit, broken windows etc...

But there are two major ones.

An illegal enclosure of a second floor with a fine of $500 a day dating back to 2011.

Unpermitted mechanical plumbing and electrical conversion at $273 a day dating back to 2011.

One of them total $147,000.00, the other total $395,000.00 as of December 2012. So a total of over half a million dollar lien on a 135K property.

People are bidding on it on Hubzu, why?

I spoke to the city code enforcement and finance, these liens have SUPER PRIORITY and will survive change of ownership, and cannot be negotiated away or discussed until the issues are first resolved.

So whoever the bid winner when doing title will run into this, most likely withdraw, and it goes back onto Hubzu again and again and again? Or will HSBC just quit claim it to the city? Or will the city at some point just wipe the slate clean?

I checked with the police department too, and there were squatters there, the city police hired a contractor to board up the property, all windows and doors and pulled the electric meter out. That contractor now has a lien on the property too.