Re: Buying a 2nd Mortgage foreclosure
Posted by Julio Martinez-Clark on February 29, 2008 at 12:20:39:
In Reply to: Buying a 2nd Mortgage foreclosure posted by WashingtonStateInvestor on February 27, 2008 at 18:00:26:
There seems to be a confusion about your question. This will help clarify (from the link below)
"Question: I went to an auction. The house had 3 mortgages on it. The holder of the 3rd mortgage was foreclosing. The amount due was $100,000.00. The first and second mortgages totaled $200,000.00. The bidding was $250,000.00. Which mortgage gets paid first. Does the buyer owe $250,000 or $300,000?
Answer:At any auction, whomever is in 1st position will always get paid first. If there are any unpaid property taxes, those will also get paid. Whatever money is left over from paying off the 1st mortgage will now go towards paying off the junior lien holders. You can learn more about lien priority on our website. Lien Priority.
Here is where you have to be careful. In some states, whomever is foreclosing has the option of starting the auction out at whatever they are owed. Then the high bidder has to pay off any senior lien holders. So if the 3rd is forclosing and the opening bid is $100,000 and you bid, then you are responsible to pay off the 1st and 2nd. That is why you always have title checked before you ever bid or you will get what you asked for.
Let's hope this auction included all the loans. If not, someone will be very unhappy they have to pay $450,000 for a property worth $250,000. If it included all the lien holders, then yes, the high bidder only owes $250,000. Then the 3rd lien holder, since they did not receive the full amount that was owed, have the option of filing a deficiency judgment against the homeowner for the deficient amount. Or they can 1099 the homeowner and count the loss as income towards the homeowner."
Julio Martinez-Clark
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