All Forum Posts by: Brad Havens

I'm looking at a Sheriff's Auction for a property which was refinanced under the Home Affordable Modification Program (HAMP).  The result of this refinance was two separate principal amounts, a 'current' principal amount which was set up for repayment under a fairly normal principal/interest amortization schedule, and a 'deferred' principal amount due as part of a balloon payment at the end the mortgage period.

I'm trying to figure out which amount the bank is likely to bid on this property.  Is it the full amount (both principal balances) or just the 'current' balance?  I ask because looking at the court documents which have been filed during the foreclosure process, the bank lists both in it's initial filing, however in the document stating the judge's decision on the case, it only specifies the 'current' principal amount as the amount in the judgement.  I would assume the bank doesn't care what the judgement says and that they'd be likely to bid the full amount during the Sheriff's Auction, but I just wanted to double check and see if anyone else had experience with a situation like this.  Is there any reason why they would bid less than the full amount in this case?

Thanks! 

I'm looking into a sheriff's auction for a property where the owner is still an occupant.  I'd be purchasing this with the intent for it to be my primary residence, at some point, not a fix & flip.  I stopped by the property and briefly talked to the owner who said they were working on 're-doing' the loan and that they didn't believe it was going to be an issue for them to retain the house.  Trying to decode what they meant by that (and how true it might be), my guess is that it has to do w/ the state having a 'redemption period' of up to 90 days after the auction date, during which the owner can reclaim the property if they are able to pay off the current mortgage in full (e.g. refinance).  This would provide them a path to still retain ownership, even if the auction sale completes.  

Through research, I did find that the property has been foreclosed several years ago, but it was halted due to the owner filing for bankruptcy. Also, throughout the foreclosure process the owner has filed several court answer documents stating that they are still attempting to find a resolution, but their options are running out (e.g. cashing out IRA). This makes me believe that they may be overstating (or over-estimating) their possibility of 're-doing' the loan. That being said, they've owned the house for a number of years and it's in a growing area, so it appears that they have a decent amount of equity in the place. To me, this suggests that they're less likely to walk away from it, and would possibly still have some avenues for using that equity to get them through, in some manner.

My question is, based on that, is it still worth placing a bid on the property at the auction (would be paying cash for it)?  If I won the auction and the owner is able to reclaim the house 90 days afterwards, there's an opportunity cost involved with having my money tied up for that long.  Alternatively, if after the auction they decided to list the property with a realtor above the auction amount in hopes of earning back some cash, I would not be able to put in an offer due to all my cash being tied up in the auction (it would be much preferable for me to buy via this more traditional route, as then I would have more regular financing options available, even if it was a bit more expensive).  Would it be better to not bid on the auction and communicate w/ the owner directly in the hopes of arranging some kind of direct sale?  Or is is still worth placing the bid and rolling the dice on the redemption period elapsing?  Or is there some other option that I'm not thinking of?

Thanks!