All Forum Posts by: Robert E.

Thanks again Mike. Great info. If the judge throws out the results of the auction - generally speaking does the auction buyer receive a full refund?

Thanks Mike. Sounds like if someone were to buy this at auction - once the auction buyer has been issued the Sheriff's Deed, that Sheriff's deed basically overrides the quit claim deed that the homeowner executed... and transfers full ownership to the auction buyer (albeit there may or may not be other liens attached to the property). Do I have it correct?

I'm looking at a property due for auction sale in IL. A few weeks after the Lis Pendens was filed by the lender, the homeowner executed a quit claim deed to transfer ownership of the property to another person resident at the same address. For example... (and these are not the actual people's names or address)

Jeffrey Smith, an unmarried man, resident at 1234 Penny Lane, hereby quitclaims to Lucy Kelly a divorced woman resident at 1234 Penny Lane.

Jeffrey Smith is the borrower from the lender who is foreclosing. Lucy Kelly is not connected to the lender, i.e. she isn't on the mortgage loan that's being foreclosed on.

Does the state recognize this as a legitimate transfer of ownership from Jeffrey to Lucy?

If that were the case, then it seems if someone were to bid on this property at auction they'd be paying off Jeffrey's balance due to the mortgage lender, but not obtaining ownership of the property from Lucy, as ownership has been transferred to Lucy now. I must be missing something here.

What happens in these situations... where a borrower quitclaims to a friend or family member without first satisfying all loans attached to the property that's being foreclosed on?

I’ve been researching getting into buying properties at auction myself. I’m definitely not an expert but will share some of what I’ve learned. You'll really want to educate yourself first before making an actual purchase at auction. Some resources for that…

This website. A lot of great posts on here by folks with years’ of experience buying foreclosures.

The book Bidding to Buy. Great book that explains the process in clear simple terms.

The county recorder of deeds website where the properties are located. These sites are often FREE to browse and you can self-educate yourself on how to run a title search.

You’re already thinking on the right track asking which liens become unattached from a property. Generally speaking, liens that are in a senior position to the lien that’s held by the foreclosing party are going to remain attached to the property after it’s purchased at auction – liens that are junior are wiped out. 

Government liens, i.e. IRS or local property tax liens are always going to be senior. Lien position is something you’ll likely want to master first, before buying at auction to avoid making a costly mistake.

Once you understand lien position, in order to determine which liens are senior and which are junior for a particular property, you’d have to either do a DIY title search on the county recorder OR pay a title company to do so. With being new to this I’d pay a title company for your first purchase.

I've attended a handful of auctions to get more familiar with the process, and at one I saw a couple pay $13,000 for what they thought was a 2 bedroom condo worth about $50,000. I'd looked up the liens when I got home and they'd purchased a junior lien… the HOA was the foreclosing party, foreclosing for money past due to them. If the couple still wanted the property when they learned this, they'd have to pay off the outstanding first position mortgage as well, which was in the ballpark of $40,000.

Good luck with it.

Rob

Julie's made a lot of good points, particularly the one about buying in a good school district. All parents want a good education for their kids. Something additional to consider with the Townhome is the HOA and how that could impact your ability to rent the Townhome out. The HOA will have control over that and the level of control that they have, can range from, they don't allow rentals at all, to, they allow rentals, but only allow you to do it for a few consecutive years at a time, or they may have no restrictions at all.

The HOA typically has good reasons for whichever approach they take. For example, too many rentals in a complex can impact property values and make it tough for new buyers to get a mortgage (some lenders want the percentage of rentals in the complex to be below a certain number). What I'm getting at is, with a Townhome it's possible you may be limited with what you can do with it as a landlord, including renting it out. Something to keep in mind.

Also for the HOA fees, these fees are usually a good thing, because of what's likely included with them, i.e. grass cutting, common area upkeep and maintenance like garages, but still something that you need to factor in as an expense. As Julie's said, these can be fairly high sometimes.

One last point of mention, we'd rented out a Townhouse in the past, and the main headache that we had was the neighbors in the bordering unit complaining about the slightest sound that came from our tenants (and this wasn't wild parties kind of noise - we're talking kids playing). You won't have this sort of headache with a detached SFH.

As an investment property SFH and not Townhome is likely better.

Thanks for responding guys. This is helping me to understand it better. I did do some more of my own research on the subject to get a better handle on it, and according to the IL 'Property Tax Code' state statute, under 'Redemption Procedures and Notice Requirements' I found:

"A right to redeem property from any sale under this Code shall exist in any owner or person interested in that property, other than an undisclosed beneficiary of an Illinois land trust, whether or not the interest in the property sold is recorded or filed. Any redemption shall be presumed to have been made by or on behalf of the owners and persons interested in the property and shall inure to the benefit of the persons having the legal or equitable title to the property redeemed, subject to the right of the person making the redemption to be reimbursed by the persons benefited."

So anyone can redeem the taxes looks like, provided that they have an 'interest' in the property. Will definitely need an attorney to clarify that part - what defines a person who has 'interest' in the property? From a lot of your responses, it sounds like that definitely includes me if I buy at the Sheriff's Sale. Thanks again!

Thanks for your responses guys. This helps a lot.

@Tom, So it sounds like the title insurance is fairly critical. I was thinking it'd be the foreclosing lender on the hook for missed liens. Glad I asked the question.

@Peter, appreciate the explanation. What you've said here really spelled it out for me:

"Clerk of the Court or Sherriff who issues something like a Certificate of Title or Sheriff's Deed which does not have any warranties of title ."

Particularly the no warranty of title piece. I understand now why the court wouldn't be on the hook if a lien holder was missed.

For the lien positions I'm still learning those, and agree, definitely seems critical to know these. Great stuff guys , thanks again!

Thanks guys! Appreciate the responses, good info.

Just want to make sure I'm understanding correctly. Assume that I already bought the property at foreclosure. It sounds like even though the tax lien investor holds the property tax lien and not the county, the tax lien investor doesn't control the price that I'd need to pay to have the tax lien wiped from the property... and the amount that I'd need to pay to have the lien removed, would essentially be limited to back taxes/interest/penalties. Do I have it correct?

and if so, who would I be writing the check to, the tax lien investor or the county?

Hello BP community!

I'm looking at a foreclosure property in IL. Mortgage lender is the foreclosing party. Judgment of foreclosure already ordered by the court. Sheriff's Sale scheduled for May.

Separate to all of this, a tax lien certificate for the property was purchased by an investor last year. The homeowner redemption period for that ends in 2022.

Here's the million dollar question....

If I were to purchase the mortgage loan at the sheriff's sale - am I free and clear to pay off the senior lien, the property tax lien to wipe it out?

If the answer to that is yes, how much am I paying to wipe out the tax lien - is it just the outstanding balance that the homeowner owes to the tax lien investor, i.e. back taxes plus interest?

Thanks in advance!

Rob

Sorry in advance for the long post : )

I’ve been doing quite a lot of self-educating around foreclosures, including reading books on the subject and reading a lot of the great posts on this forum. I’m trying to get a better handle on where the foreclosure investor can get burned, i.e. lose money, as a result of mistakes made during the foreclosure case itself. I’ve got questions around 2 specific areas of the foreclosure case process:

Lien Holder Missed

1. When the law suit ‘lis pendens’ is filed by the foreclosing party, it’s my understanding that all lien holders are meant to be named in that filing as defendants by the foreclosing party. What happens in the following hypothetical scenario?

• The foreclosing party, omits naming one of the other lien holders as a defendant in the case when they file the foreclosure suit (assume that there is another lien holder just for example).
• Eventually Judgment of foreclosure is issued by the court, but the judgment does not list the lien holder that was omitted when the case was filed.
• The loan being foreclosed on is bought at Sheriff’s sale by foreclosure investor.
• 3 months later the lien holder that was omitted from the case, calls foreclosure investor and says, “you don’t own that property clear. We have a lien on it and we were never notified that it was being foreclosed on”

1. Who holds the burden of resolving this problem – who’s legally required to resolve the problem, is it the foreclosure investor, the foreclosing lender or the court system that issued the judgment of foreclosure?

1. Does the court system refund the foreclosure investor the money that the investor used to buy the foreclosed loan at the sheriff’s sale?

1. Is this a hypothetical scenario that just never actually happens in real life?

I appreciate that before the foreclosing party files the case, they’re going to run a title search. I’m more just trying to get a general understanding of.. if there are screw ups during the foreclosure case process, can the foreclosure investor get burned by these and ultimately lose some or all of their investment?

Homeowner not Notified

I’ve noticed in a lot of the foreclosure case documents that notification of the law suit gets mailed out to all defendants in the case, including the homeowner/borrower. I’ve also noticed that a response or acknowledgment from the homeowner seems like it’s never filed with the case, except for in cases where the homeowner is contesting the foreclosure.

Is there a minimal requirement that the foreclosing party has to meet when notifying the homeowner of the suit? For example does the foreclosing party have to file evidence with the court that they sent notification of the law suit to the homeowner’s address via certified USPS mail?

What I’m getting at is could the homeowner (or another lien holder or even HOA) maintain the following? “hey, I was never notified of this foreclosure case. The judgment isn’t valid’…. and could the homeowner undo the judgment of foreclosure based on that argument?

Thanks in advance! to anyone who takes the time to reply

Rob