Jersey City, NJ · Member since 2016 · 170 posts · 12 votes
Hi
If I buy a foreclosure from the second position for say $200,000, subject to first mortgage of lets say $300,000, and then the first position forecloses - my understanding is it forecloses the original owner, and not me.
At this point, can I pay the lender their $300,000 to prevent foreclosure? Can they deny my payment and still foreclose?
And when they do foreclose because lets say I could not pay - what happens to my $200,000 before they take the title from me? Do they have to include my cost and foreclose for $500,000, and pay me before taking away the title?
I am talking about a home that is auctioning right now because the lender in 2nd place is foreclosing.
And I buy it subject to the 1st mortgage.
Now my concern is that the 1st mortgage may also foreclose and sell the property - and I would lose the property and the money i paid for it too.
So can i offer to pay their balance and stop the foreclosure? While this may seem like a no-brainer, they may hope to get a higher bid closer to market value, and so reject my offer and proceed to foreclose.
Alternatively, I can let them foreclose and I will lose the property, but somehow have them pay me whatever i paid for it?
You want to bid enough to pay off both liees and then you own the property. If you fail to pay off the 1st and dont have the cash they could foreclose and your funds are gone.
You want to bid enough to pay off both liees and then you own the property. If you fail to pay off the 1st and dont have the cash they could foreclose and your funds are gone.
Ok. Understood about my funds going away in that case.
Will they foreclose the original owner or me? Its the original owner who signed the promissory note.
The first lender forecloses on the Property....you would lose all the money you put in.....no one owes it back to you.
Yes, you have the right to pay off the first in full, if you buy it at the 2nd's foreclosure, as a "successor in interest", but it can be like pulling teeth for them to give you a pay off and get it done, plan on a month to get that done from when you start.
The first lender forecloses on the Property....you would lose all the money you put in.....no one owes it back to you.
Yes, you have the right to pay off the first in full, if you buy it at the 2nd's foreclosure, as a "successor in interest", but it can be like pulling teeth for them to give you a pay off and get it done, plan on a month to get that done from when you start.
Got it. That's the term I guess i was looking for - the right to pay off as a "successor in interest".
Thanks.
Btw, the 1st forecloses the original owner or the new owner of the title, me in this example?
If you buy at an auction that was started by a junior lien, then you will have to negotiate something or pay off the senior liens in order to clear your title. This will include the senior position mortgage, property tax liens, HOA liens, and utility liens.
Where people get into trouble is not researching which position has initiated the auction and then later come to find out there are hundreds of thousands of dollars still attached to the house.
Still learning so forgive me if I'm incorrect but I haven't seen anyone mention anything about equity yet. Unless I'm mistaken, if you bought a second for $200K and there's a first in place for $300K but the property sells at auction for $1mil then you would get paid off. The threat to you is if there isn't enough equity to cover your position. Sorry if you meant to presume that there wasn't enough equity to cover your position.
of course - if there's enough equity to cover the sum of all debts, there's profit.
the biggest challenge i find when i look at a foreclosing property is to "know" how many loans does it have, and so there may be an unseen debt from senior positions.
of course i could run a title search but its not fun to spend a hundered bucks on every property only to find out 90% of them are underwater.
If you're purchasing an asset (as a debt buyer) or already own it (as a debt owner), you're legally allowed to pull credit. The note seller will probably require you to sign an NDA first.
We buy in bulk by large trusted institutions but we also sometimes pull lien reports. Also, if you go into public record you'll find the recording date. It's the date itself which signifies what's 1st and what's 2nd.
@dave - you are mixing apples and oranges. OP is talking about purchasing at foreclosure. You are talking about note sales. Two totally different worlds and purchasing PROPERTY does NOT afford you any right to pull credit on a person(s) that you do not have a contractual relationship with.
OP - Um...I wouldn't bid an amount equal to the first and second total debt if the foreclosing entity is the second lien holder. That money will NOT go to pay the senior but instead will go back to the borrower if there are no liens behind the foreclosing entity. Better to bid to pay the 2nd and then stroke a check for the senior after you own it subject to the senior.
If you're purchasing an asset (as a debt buyer) or already own it (as a debt owner), you're legally allowed to pull credit. The note seller will probably require you to sign an NDA first.
We buy in bulk by large trusted institutions but we also sometimes pull lien reports. Also, if you go into public record you'll find the recording date. It's the date itself which signifies what's 1st and what's 2nd.
I wouldn't go to the bank on that strategy (Literally). Dates are important but they are not the end all be all for lien priority. It's not uncommon for an newer recording date to be superior to the older date. Perfect example is; a 1st lien recorded in 2002. 2nd lien HELOC recorded in 2006. Borrower wants to refinance their first only and does. They get a new 1st in 2012. Well, that date is well behind the 2006 date but they will be in first lien position via subordination between then and the 2nd lienholder (Not always but 99% of the time on a rate and term). Better to pull a prelim in my opinion.