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Updated over 8 years ago,

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3
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0
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Marcin Sliwowski
  • Cary, NC
0
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3
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reinstate or foreclose on senior lien after junior auction

Marcin Sliwowski
  • Cary, NC
Posted

For context I'm in North Carolina, but my question is not specific to state foreclosure laws. I have attended a few courthouse foreclosure auctions and have observed the following situation and I don't quite understand it.

A property has just two liens on it, a senior and junior. The public auction for the property is being triggered by the junior lien. At the end of the bidding the winner comes away as the owner of the property with a trustees deed. This is not an auction for the lien, in NC you come away from an auction not as a lien holder but a property owner.

The property is valued at say 250K, the junior lien bidding started at 100K and ended at 190K and to the best of my knowledge and for the sake of this question the outstanding balance on the senior lien is 50K. Both liens are held by the same lender/bank. 

What I don't understand is why would an investor bid at the foreclosure triggered by the junior lien? 

I don't think the lender/bank will be interested in re-instating the senior lien to the winner of the auction from the junior lien. The bank should have no trouble making a lot more money putting the house at auction again. This time around triggered by the senior lien and setting the opening bid at roughly 50K. There will almost certainly be third party bidders that will bid and drive the winning bid up, since there is so much equity in the home.

Once the auction triggered by the senior lien is over the winner walks away as the owner of the property with a trustees deed. The winner of the auction triggered by the junior lien then just went through a foreclosure and lost his deed/ownership of the home. 

Isn't that what the bank would do, foreclose again instead of re-instating?

Thanks

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