Need help with 4 plex going into receivership

[Bob Malecki]

I acquired a 2nd position note on a 4 plex located in WA state, the borrower does not live at the property. Its scheduled to be sold this November and I was expecting to get a decent payoff on my note, but the preliminary closing statement shows expenses/payoffs that put the closing total about $180K over the sale price, comprised of prop taxes, broker commissions, unpaid utilities. The owner/borrower/seller has told me that he is going to put the property into receivership, and I'm looking to determine my risk on this, not being experienced with receiverships. 

If anyone has some experience/knowledge on what  may be in store, it is appreciated. My concern is that being a junior lien, I may get wiped out, although there is equity above the senior by approx. 20% of the current selling price/value (before any closing costs, taxes, etc). Any thought on this is appreciated. @Dion DePaoli any perspective you can contribute is appreciated. 

Bob

[Dion DePaoli]

@Bob Malecki

In regards to the sale, clearly the first lien and you are superior to mostly all of  those additional costs except property taxes.  I would let the seller and broker's know you will not short your position.  

In regards to the reference of receivership, a borrower does not place an asset into receivership, the court does that.  The receiver answers to the court but acts as a fiduciary 3rd party.  A mortgagee can object to the notion (after another interested party asks the court) based on the fees a receiver would charge eroding their recovery.   Sales by receivers can also be objected to by creditors.  Main point, the court is involved.  If a borrower claims they are doing that, that is more like hiring a property manager for the borrower's interests not the creditors.

I would talk with your legal counsel and look into requesting the court assign rents to you and the first lien.  I would mention to your counsel that the borrower brought up the idea of assigning their own receiver and you are concerned there will be further mismanagement of funds and property.  

I might be able to give you more insight but would need some more file details.  As needed, call or email me direct Bob.