Foreclosure Effect on 1st or 2nd
Effect of Foreclosure on the Second when the First Forecloses Let's say that you find a foreclosure that is worth $100,000 and the property owner owes the Bank on a 1st mortgage $60,000 with $500/mo P & I and owes a 2nd mortgage $10,000 with $100/mo P & I The Bank (1st Mortgage Holder) is Foreclosing and the property goes to a public sale. The highest bidder will own the property. The proceeds of the sale will be paid to the first mortgage holder (bank) first; to the second mortgage holder second; to other lien holders, if any, third; and the remaining proceeds will go to the owner. Example: Case 1: You are the high bidder at $75,000 (You are now the owner of the property) $60,000 will go to the 1st mortgage holder $10,000 will go to the 2nd mortgage holder $5,000 will go to the original home owner Case 2: You are the high bidder at $65,000 (You are now the owner of the property) $60,000 will go to the 1st mortgage holder $5,000 will go to the 2nd mortgage holder Nothing will go to the original home owner Case 3: You are the high bidder at $60,000 (You are now the owner of the property) $60,000 will go to the 1st mortgage holder Nothing will go to the 2nd mortgage holder Nothing will go to the original home owner Effect of Foreclosure on the First when the Second Forecloses Same story as above but the 2nd is foreclosing! Foreclosure is worth $100,000 and the property owner owes the Bank on a 1st mortgage $60,000 with $500/mo P & I and owes a 2nd mortgage $10,000 with $100/mo P & I The Bank (2nd Mortgage Holder) is Foreclosing and the property goes to a public sale. The highest bidder will own a note. The proceeds of the sale will be used to satisfy the second mortgage holder. The high bidder now must contact the first lien holder, to purchase the mortgage holders. Keep in mind that no lender has to sell their note. To actually own the property you will have to start a foreclosure proceeding after you purchase the 1st mortgage. Note: If you do not purchase the 1st mortgage and just hold the 2nd mortgage and the 1st mortgage holder forecloses on the property and not enough funds to cover your note come from the sale or the property is purchased back by the bank "Becoming an REO" you will loose you investment.
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From my experience when a 2nd mortgage/trust deed holder forecloses the highest bidder will own the property subject to the 1st mortgage/trust deed holder's http://www.interest.The highest bidder will not own a note. Any proceeds in excess of the 2nd mortgage/trust deed goes to any junior lienholders and once they are satisfied the remaining funds if any go to the previous owner.By the way I am in California.
As I stated on the first reply!
When you bid on a 2nd mortgage it is secured by the property "You do not own the property!", as it is subordinate to the 1st. In order to own the property you would have to purchase the 1st mortgage note and upon the 1st mortgage note becoming delinquent you would have to foreclose on the subject property to own it.
When you purchase a 2nd, 3rd or even a 4th mortgage in foreclosure "YOU DO NOT OWN THE REAL ESTATE"!
To own real estate you must be able to take title!
You do not take title in a 2nd, 3rd or even a 4th mortgage in foreclosure as it is only a note secured by real estate! As you stated subject to the 1st.
When you are the successful bidder on a 2nd, 3rd or even a 4th mortgage in foreclosure you are simply a subordinate lien holder. "YOU DO NOT OWN THE REAL ESTATE"!
John Michael.
let me qualify my earlier post. here in new york, being a judicial foreclosure state, if a 2nd mortgage lender forecloses, the successful bidder at auction gets title to the property subject to any senior liens of record. Now i have personally bought at auctions whereby the 2nd foreclosed. I received a REFEREES DEED, (the equivalent of a TRUSTEES DEED in your state) and in each instance i contacted the 1st for payoff. I had title to the property. Now i know that you are from Missouri and that laws may differ as to the actual foreclosure process, and there maybe rights of redemption after the sale but the purpose of a foreclosure sale is universally the same throughout the country. To sell the premises to the highest bidder, not sell the mortgage to the highest bidder..if i am wrong please site law whereby a successful bidder at a 2nd td sale, acquires the note and not title.
Now we made it to the 2million-dollar question and the answer you where high bid on the 2nd but you did not get title to the property till you paid off the 1st. Hello can you hear me now, that's what I said.
Let me ask you a real tricky question since we are in the word game phrase. If you did not pay off the 1st and just purchased the 2nd what do you own now???????????????????
I know we will play the word game yet again you will say you purchased the property subject to the 1st but in reality if you do not clear the 1st you do not own the property! WHY? You do not have title! Now follow me real close on this one "If you do not take title to the property you do not own it therefore you just purchased the note.
Buy the way thanks for the enlightening p.m. you sent me not need to send another as time waist when we play word games!
we are not playing word games.. i think that you are clueless, and i am very surpised that TCI picked your crap to be posted as an article. It gives the wrong information to other investors. it makes me wonder about your experience,. Perhaps you are an investor, but i would not venture to things that i dont know about, and then give the information on the subject. Again i challenge you, to show me in the foreclosure law (Missouri) where it says that in a 2nd mortgage foreclosure sale you only acquire the note and not title if you are the successful bidder. what would happen if the bank was the successful bidder, they would acquire their own mortgage note, that doesnt make sense. and to clarify my earlier post i was the successful bidder at a 2nd mortgage foreclosure sale, i acquired title, (REFEREES DEED). subject to any superior liens of record. title meaning ownership..
2 months later i PAID off the 1st mortgage...I did not have to foreclose on the 1st as you suggest on your article..dont the moderators read these articles before they pick them to be posted?
In support of my article:
/>
See Single Family Mortgage Foreclosure Act of 1994 at http://uscode.house.gov/search/criteria.php
Also see Shane v. Winter Hill Fed. S&L, 492 N.E.2d 92 (1975); C&S National Bank of S. Car. v. Smith, 284 S.E. 770 (1981); Gluskin v. Atlantic S&L Association, 108 Cal. Rptr. 318 (1975); Gulesarian v. Fields, 218 N.E.2d 397, 351 Mass. 238 (1966); Strong v. Stoneham, 310 N.E.2d 607, 2 Mass. App. 828 (1974); 100 Eighth Avenue Corp. v. Morgenstern, 150 N.Y.S. 471 (1957); Amoskeag Bank v. Chagnon, 572 A.2d 1153 (Sup.Ct. N.H., 1990); Kaminskas v. Cepauskis, 17 N.E2d 558, 369 Ill. 566 (Sup. Ct. 1938); Avondale Shipyards, Inc. v. Belcher, 754 F2d 1300 (La. 1985); Houston Lumber Co. v. Skaggs, 613 F.2d 416 (Sup Ct. of N. Mex.1985); Peterman-Donnelly Eng. & Con Corp. v. First National Bank, 408 P2d 841 (Ariz. App. 1965); Rock River Lumber Corp. v. Universal Mortgage Corp. of Wisconsin, 262 N.W.2d 114 (Wis. 1978); cf. Pelican Homestead v. Security First National Bank, 532 So.2d 397 (La. 3rd Cir. 1988).
Cases cited in 50 Am Jur. Subrogation, §107 at note 8. Subordination of Purchase-Money Mortgage special Rule.
See Citizens & Southern National Bank v. Smith, 284 S.E.2d 770 (S.C. 1981); Gluskin v. Atlantic S&L Association, supra; MCB Ltd. v. McGowan, 359 S.E2d 50 (N.C. App. 1987); Southern Floridabanc Federal Savings v. Buscemi, 529 So.2d 303 (Fla. App. 1988); Dickens v. First American Title Insurance, 784 P.2d 717 (Ariz. App. 1989).
Miles Home Div. Of Insilco Corp. v. First State Bank, 782 S.W.2d 798 (Mo.Ct.App. 1990).
Some notable cases related to 2nd's and foreclosure:
In Barnes V Resolution Trust Corporation 664 So 2nd 1171 (4th district 1995) the second mortgagee (lender) began making payments on the first mortgage after the second mortgagee had foreclosed on the second mortgage. Thereafter the first mortgagee sought to foreclose on the first mortgage. The second mortgagee argued that acceptance of installment payments by the first mortgagee from the second mortgagee estopped the first mortgagee from acceleration and foreclosure.
The Court disagreed and stated that "by terms of the mortgage, the first mortgage holder had a contractual right to foreclose when mortgagors (borrowers) defaulted. The first mortgage holder was not obligated to second mortgagees as they were not parties to the first mortgage, nor did they ever assume the first mortgage and there was no evidence that the first mortgagee...induced second mortgagee to continue making payments to satisfy first mortgage.
Also in Travers v Tilton 134 So 2d 807 (2nd DCA 1961), which suggests that to constitute estoppel, the mortgage holder must engage in conduct which intends, or reasonably calculates, to mislead to the detriment of the party asserting an estoppel.
Suggested readings on the issue:
Kravotil and Werner, Modern Mortgage Law and Practice, (2nd Ed. 1981),
Nelson and Whitman, Real Estate Finance Law, §10.5 (2nd Ed. West 1985)
Rosser, "Second Mortgages: Coming of Age," Mortgage Banking, (November 1983)
My point is not to prove right or wrong. The point is to invest wisely.
Simply review the facts, make a wise decision, and above all never take ones word for it! Simply investigate and invest.
Why did I check with my attorney on this for the simple reason that many of my students had questions on this issue and many investors had the same opinions as many that posted replies to this article but in a much more professional manner so when in doubt get legal council.
This is my opinion and I am sticking to it!
John Michael
It looks like there is no point to continue on the issue!
So I simply state a few facts!
When you purchase a 2nd in a foreclosure proceeding you do not own the subject property until you get title, what I am stating is the simple fact that the property must be fully in your name or your business entity. If you do not clear priority liens such as a 1st mortgage you do not own the property.
When you pay off the 1st that is not delinquent you the holder of the 1st mortgage now, you can not simply tell the homeowner they have to move this is why foreclosure laws were established in each and every state.
The laws were established not to long after the great depression to protect homeowners. You as an investors must follow the rules of foreclosure as well.
Just because an investors may have convinced a homeowner they have to move and they did because you purchased the 2nd in a foreclosure proceeding and than purchased the 1st from the lender that was not delinquent does not void foreclosure laws.
Example: Predatory lending was done and laws and policies were established by lenders and federal agencies to attempt in preventing this in the future. Just because it was done does not make it right and legal!
Before issuing this article I consulted with my real estate attorney and he agreed fully with me.
Investors, no matter how many agree or even disagree with me; it really does not matter! Consult with your attorney!
It's a fact that you can invest in real estate using all kinds of creative investing strategies some legal and some not but if you follow the letter of the law you will not be faced with a legal action towards you!
Throughout my years of investing I have seen investors use all kinds of strategies to buy real estate and I have seen many make large profits and in turn they have lost it all because they failed to follow the legal system.
lp1 wants me to prove by law that what he has done is legal, but I make this one simple statement!
What law allows you as an investor to purchase a 1st mortgage that is not delinquent and take the property without due process of law?
John,
I'm a little confused about your position here. Are you saying that the successful bidder at a sheriffs sale of a second mortgage interest isn't going to get title? Or that his title isn't going to be clear? Granted he is still going to be subject to the first. But clear title is not the normal definition of ownership. Clearly lots of people think they "own" a property where there is an underlying mortgage. Even some people think they "own" a property where title is in their name and the mortgage is not-- that is after all how a sub-2 deal works.
Also is it your opinion that this purchaser of the 2nd position cannot take possession of the property over an unco-operative prior "owner" by eviction because the "buyer" does not yet own it?
This is my position:
When you purchase a 2nd in a foreclosure proceeding you do not own the subject property until you get title, what I am stating is the simple fact that the property must be fully in your name or your business entity. If you do not clear priority liens such as a 1st mortgage you do not own the property.
When you pay off the 1st that is not delinquent you the holder of the 1st mortgage now, you can not simply tell the homeowner they have to move this is why foreclosure laws were established in each and every state.
The laws were established not to long after the great depression to protect homeowners. You as an investors must follow the rules of foreclosure as well.
Just because an investors may have convinced a homeowner they have to move and they did because you purchased the 2nd in a foreclosure proceeding and than purchased the 1st from the lender that was not delinquent does not void foreclosure laws.
Example: Predatory lending was done and laws and policies were established by lenders and federal agencies to attempt in preventing this in the future. Just because it was done does not make it right and legal!
Before issuing this article I consulted with my real estate attorney and he agreed fully with me.
Investors, no matter how many agree or even disagree with me; it really does not matter! Consult with your attorney!
It's a fact that you can invest in real estate using all kinds of creative investing strategies some legal and some not but if you follow the letter of the law you will not be faced with a legal action towards you!
Throughout my years of investing I have seen investors use all kinds of strategies to buy real estate and I have seen many make large profits and in turn they have lost it all because they failed to follow the legal system.
What law allows you as an investor to purchase a 1st mortgage that is not delinquent and take the property without due process of law?
I can not state this any more direct!
There is considerable variation of practice between the states on the methods of foreclosure but I cannot think of anywhere where your position is actually the way things are done.
When you purchase a 2nd in a foreclosure proceeding you do not own the subject property until you get title, what I am stating is the simple fact that the property must be fully in your name or your business entity. If you do not clear priority liens such as a 1st mortgage you do not own the property.
I think that half of this sentence is correct and the other half incorrect unless you are using "own" in a very restrictive sense.
It is true that you will not own the property until you get title. Which will be issued by the court/trustee/sheriff/referee in accordance with the law and practice of whatever state the property is located in and subject to the underlying mortgages or other liens. In MO, as I understand it, that proceedure includes a 12 month right of redemption on behalf of the prior owner unless the purchaser posts a bond. You will not "own" the property then, for an entire year.
It is not true that you will need to clear the first mortgage or other senior liens before the appropriate entity will issue a deed. (MO Revised Statutes 443.340 where the proceedure for issuing a trustee's deed is set forth without exception for whether the lien foreclosing is senior or junior).
This deed will give you the right to have the prior owner evicted from the property without his consent. Yyou may possess the property, move in, rent it out, collect the rent even convey your interest in it subject to the existing first mortgage. I do not know what other meaning of "own" you can want. Yes, you will not own it "free and clear", but most property has some encumbrance on it these days and we don't usually say that the mortgage holder is the owner.
What law allows you as an investor to purchase a 1st mortgage that is not delinquent and take the property without due process of law?
The question, as asked is not relevant to the discussion. The investor is not purchasing a 1st mortgage, he takes title subject to it. He does not take the property without due process, he takes it as a result of a sheriff's/trusttee's etc. deed issued as a result of the foreclosure. If and when he pays off the first mortgage it will not be as an investor purchasing said mortgage it will be as a landowner clearing his title.
Besides the clear and established practice (I have personally been involved in the foreclosure of 2nd mortgages on just this basis, including evicting the prior owner and taking possession subject to an existing first) the proceedure you seem to be suggesting makes no sense. The whole purpose of a sheriff's/trustee, etc. sale is to convey title not to transfer ownership of a lien. If all that one wanted to do was auction a lien you don't need the courts to do that. Liens get bought and sold every day without the owner of the property's consent. It is the process of alienation of title which requres the courts intervention.
are you suggesting that a referees deed is not legal ??? a referre is a special court appointed individual often an attorney who must follow certain rules to confirm a foreclosure sale. here in ny after the sale he must file a report indicating what was bid at the sale and how those funds were disbursed ie his fees, unpaid taxes, jugdment amount to the foreclosing lender and surplus if any to the county clerk...now again a referees deed is a transfer of ownership....i can mortgage, convey, start eviction proceedings to get possesion....for your info, the definition of TITLE as per Merriam-Webster dictionary is
: all the elements constituting legal ownership b : a legally just cause of exclusive possession c : the instrument (as a deed) that is evidence of a right
3 a : something that justifies or substantiates a claim b : an alleged or recognized right...
now as far your last question "What law allows you as an investor to purchase a 1st mortgage that is not delinquent and take the property without due process of law?"..
what does that have to do w/ anything ?
but to answer your question ...the due process of law was when the lender filed for foreclosure and a sale was conducted ...now the suceesful bidder has ownership.and have the right to clean up the title including paying off within a reasonable amount the 1st mortgage.
i am also curious as to why would you consult an attorney prior to posting an article? or did you ? i dont think you did...i am just annoyed at people who claim to have this vast amount of knowledge when in fact they dont... i challenge your attorney to come on and dispute what i've been saying. you are a moderator and a self proclaimed guru, so lets hear what what your attorney has to say. if i am wrong then i will leave this site and never post again..if you are wrong then you should step down as a moderator and rise up and tell everyone that you dont have any experience in this subject. i challenge you...
This is my position:
The investor won high bid on the 2nd mortgage that was in foreclosure and now purchases the first mortgage, acquiring the right to foreclose in the event the borrower fails to pay as agreed on the 1st.
Homeowner falls behind on the 1st. The investor now holding both mortgages has a powerful incentive to foreclose because that is the only way to get repaid on the second mortgage.
While any difference between the sale price at a foreclosure auction and the balance of the mortgages would go to the owner, in many cases the investor is the only bidder in the auction and they bid only the amount of the mortgages.
When you purchase a 2nd in a foreclosure proceeding you do not own the subject property until you get title, what I am stating is the simple fact that the property must be fully in your name or your business entity. If you do not clear priority liens such as a 1st mortgage you do not own the property AS OF YET.
When you pay off the 1st that is not delinquent you the holder of the 1st mortgage now, you can not simply tell the homeowner they have to move this is why foreclosure laws were established in each and every state.
Just because an investors may have convinced a homeowner they have to move and they did because you purchased the 2nd in a foreclosure proceeding and than purchased the 1st from the lender that was not delinquent does not void foreclosure laws.
are you suggesting that a referees deed is not legal ???
NO
now as far your last question "What law allows you as an investor to purchase a 1st mortgage that is not delinquent and take the property without due process of law?".. what does that have to do w/ anything ?
EVERYTHING
but to answer your question ...the due process of law was when the lender filed for foreclosure and a sale was conducted ...now the suceesful bidder has ownership.and have the right to clean up the title including paying off within a reasonable amount the 1st mortgage.
STILL DID NOT ANSWER WHAT GIVES YOU THE RIGHT TO FORECLOSURE ON A 1ST MORTGAGE THAT YOU PURCHASED WHEN IT WAS NOT DELINQUENT! AND I NEVER STATED YOU COULD NOT PAY OFF THE 1ST DID I!
i am also curious as to why would you consult an attorney prior to posting an article? or did you ? i dont think you did...
FOR SURRITETY OF CORRECTINESS!
I DO NOT CARE IF YOU BELIEVE I DID OR NOT!
i am just annoyed at people who claim to have this vast amount of knowledge when in fact they dont...
YOU STILL HAVE NOT PROVED ME WORNG SO WHAT IS YOUR POINT!
i challenge your attorney to come on and dispute what i've been saying.
WHY? YOU STILL HAVE NOT PROVED ME WORNG SO WHAT IS YOUR POINT!
you are a moderator and a self proclaimed guru,
YES I AM A MODERATOR BY INVITE! NO I AM NOT A SELF PROCLAIMED GURU. I AM A INVESTOR, A REAL ESTATE INVESTOR TEACHER AND MENTOR FOR MY STUDENTS. THIS IS WHAT A GURU IS! MY STUDENTS CONSIDER ME AS A GURU! SO I ACCEPT THE TITLE!
so lets hear what what your attorney has to say.
WHY? YOU STILL HAVE NOT PROVED ME WORNG SO WHAT IS YOUR POINT!
if i am wrong then i will leave this site and never post again..
VARY CHILDISH! NO POINT! LACK OF SECURITY IN WHAT YOU KNOW!
if you are wrong then you should step down as a moderator and rise up and tell everyone that you dont have any experience in this subject. i challenge you...
I WILL NOT DO THIS AS SERVES NO POINT! IF IN ERROR WILL STATE SO! IF ONE MAKES A MISTAKE IT DOES NOT DIMINISH THEIR KNOWLEDGE.
I AM NO LONGER IN GRADE SCHOOL AND A CHILDISH CHALLENGE MEANS NOTHING TO ME! BUT A PROFESSIONAL CHALLENGE WILL TEACH ALL OF US.
You are the one, who challenged my position in this, since you made the challenge it is up to you to prove it is in error not me! You show by law that this is not correct!
This is a professional Challenge to you:
If you can not show this to be in error as the one who challenged the integrity of my article stop wasting time.
I can not state this any more direct!
are we beating a dead horse here ?
you are bidding for ownership of the property not on the note.....the 1st mortgage is irrelevant...it can be paid off. no need to be assigned and then foreclosed on...
regarding STILL DID NOT ANSWER WHAT GIVES YOU THE RIGHT TO FORECLOSURE ON A 1ST MORTGAGE THAT YOU PURCHASED WHEN IT WAS NOT DELINQUENT! AND I NEVER STATED YOU COULD NOT PAY OFF THE 1ST DID I!
assuming that the first was current in payments there are other material defaults that gives the lender the right to accelerate the loan such as the DUE-ON-SALE clause. also mortgages that are sold in the secondary mortgage market must contain clauses like owners duty to defend title and the duty to be current with other obligations that are encumbrances on the property such as taxes, sewer , water and other liens of record. since a foreclosure has occured a material breach of contract has occured with the 1st even though payment may be current...but again this all irrelevant because after title is transfered upon the confirmation of the 2nd trustee sale the 1st can be simply paid off. no need to be bought and foreclosed on...
you said since i challenged you that its on me to prove you wrong...i think you proved yourself http://www.wrong.look at what you posted as a reply under the posting labeled "Foreclosure purchase wipes out what liens?"..you describe the foreclosure process in north carolina. nowhere in that process does it say that those procedures are limited to 1st mortgages .Please notice the end result is the property being sold to the successful bidder at auction...the reader can infer from that posting that all foreclosures sales conducted in north carolina must use the procedures given by master teacher johnmichael.
regarding your AM NO LONGER IN GRADE SCHOOL AND A CHILDISH CHALLENGE MEANS NOTHING TO ME! BUT A PROFESSIONAL CHALLENGE WILL TEACH ALL OF US comment.
its not a childish challenge..you are giving wrong information and you claim to be a teacher and a mentor to your students..a teacher doesnt plagiarize.. which is exactly that whats you do on some of your articles and or postings...you must give the credit to the original author...copying and pasting is not teaching. its taking someone elses work.
furthermore a teacher at least understands the subject matter before he attempts to teach on to other s. that's why i dont think you are much of a teacher but a poor learning student. i suggest you read commercialking's response...he is more patient than me and his response is more eloquent.
with this i am done, i can cannot do any better to explain to you. you are uttlerly convinced regarding this issue so there is nothing else to say... have a good day!!!
I think JohnMichael is confusing buying the defaulted 2nd trustdeed/mortgage from the holder of the second which does not create any ownership interest------- with buying the defaulted real property from the holder of the second via the foreclsure auction which does create ownership interest. Remember, the 2nd trustdeed/mortgage holder has the power to sell his lien or the real property which is security for his lien --end result being the new note holder's interest or the new property owner's interest being subject to the 1st trust deed/ mortgage holder's interest.
This is not the first time that JohnMichael's posts indicate confusion.... on at least two or more occassions his advice has been at best misleading, or, at worst, dead wrong. While it may be irritating to those that recognize the misstatements.... I think it is more detrimental to those who cannot.
We are all entitled to our opinion and interpretation of circumstances... but when offering an opinion as fact... you expose yourself to criticism... and must defend your position.
That was well said. JohnMichael's real estate attorney was dead wrong.
In support of my article:
/>
See Single Family Mortgage Foreclosure Act of 1994 at http://uscode.house.gov/search/criteria.php
Also see Shane v. Winter Hill Fed. S&L, 492 N.E.2d 92 (1975); C&S National Bank of S. Car. v. Smith, 284 S.E. 770 (1981); Gluskin v. Atlantic S&L Association, 108 Cal. Rptr. 318 (1975); Gulesarian v. Fields, 218 N.E.2d 397, 351 Mass. 238 (1966); Strong v. Stoneham, 310 N.E.2d 607, 2 Mass. App. 828 (1974); 100 Eighth Avenue Corp. v. Morgenstern, 150 N.Y.S. 471 (1957); Amoskeag Bank v. Chagnon, 572 A.2d 1153 (Sup.Ct. N.H., 1990); Kaminskas v. Cepauskis, 17 N.E2d 558, 369 Ill. 566 (Sup. Ct. 1938); Avondale Shipyards, Inc. v. Belcher, 754 F2d 1300 (La. 1985); Houston Lumber Co. v. Skaggs, 613 F.2d 416 (Sup Ct. of N. Mex.1985); Peterman-Donnelly Eng. & Con Corp. v. First National Bank, 408 P2d 841 (Ariz. App. 1965); Rock River Lumber Corp. v. Universal Mortgage Corp. of Wisconsin, 262 N.W.2d 114 (Wis. 1978); cf. Pelican Homestead v. Security First National Bank, 532 So.2d 397 (La. 3rd Cir. 1988).
Cases cited in 50 Am Jur. Subrogation, §107 at note 8. Subordination of Purchase-Money Mortgage special Rule.
See Citizens & Southern National Bank v. Smith, 284 S.E.2d 770 (S.C. 1981); Gluskin v. Atlantic S&L Association, supra; MCB Ltd. v. McGowan, 359 S.E2d 50 (N.C. App. 1987); Southern Floridabanc Federal Savings v. Buscemi, 529 So.2d 303 (Fla. App. 1988); Dickens v. First American Title Insurance, 784 P.2d 717 (Ariz. App. 1989).
Miles Home Div. Of Insilco Corp. v. First State Bank, 782 S.W.2d 798 (Mo.Ct.App. 1990).
Some notable cases related to 2nd's and foreclosure:
In Barnes V Resolution Trust Corporation 664 So 2nd 1171 (4th district 1995) the second mortgagee (lender) began making payments on the first mortgage after the second mortgagee had foreclosed on the second mortgage. Thereafter the first mortgagee sought to foreclose on the first mortgage. The second mortgagee argued that acceptance of installment payments by the first mortgagee from the second mortgagee estopped the first mortgagee from acceleration and foreclosure.
The Court disagreed and stated that "by terms of the mortgage, the first mortgage holder had a contractual right to foreclose when mortgagors (borrowers) defaulted. The first mortgage holder was not obligated to second mortgagees as they were not parties to the first mortgage, nor did they ever assume the first mortgage and there was no evidence that the first mortgagee...induced second mortgagee to continue making payments to satisfy first mortgage.
Also in Travers v Tilton 134 So 2d 807 (2nd DCA 1961), which suggests that to constitute estoppel, the mortgage holder must engage in conduct which intends, or reasonably calculates, to mislead to the detriment of the party asserting an estoppel.
Suggested readings on the issue:
Kravotil and Werner, Modern Mortgage Law and Practice, (2nd Ed. 1981),
Nelson and Whitman, Real Estate Finance Law, §10.5 (2nd Ed. West 1985)
Rosser, "Second Mortgages: Coming of Age," Mortgage Banking, (November 1983)
My point is not to prove right or wrong. The point is to invest wisely.
Simply review the facts, make a wise decision, and above all never take ones word for it! Simply investigate and invest.
Why did I check with my attorney on this for the simple reason that many of my students had questions on this issue and many investors had the same opinions as many that posted replies to this article but in a much more professional manner so when in doubt get legal council.
This is my opinion and I am sticking to it!
John Michael
In support of my article:
/>
See Single Family Mortgage Foreclosure Act of 1994 at http://uscode.house.gov/search/criteria.php
Also see Shane v. Winter Hill Fed. S&L, 492 N.E.2d 92 (1975); C&S National Bank of S. Car. v. Smith, 284 S.E. 770 (1981); Gluskin v. Atlantic S&L Association, 108 Cal. Rptr. 318 (1975); Gulesarian v. Fields, 218 N.E.2d 397, 351 Mass. 238 (1966); Strong v. Stoneham, 310 N.E.2d 607, 2 Mass. App. 828 (1974); 100 Eighth Avenue Corp. v. Morgenstern, 150 N.Y.S. 471 (1957); Amoskeag Bank v. Chagnon, 572 A.2d 1153 (Sup.Ct. N.H., 1990); Kaminskas v. Cepauskis, 17 N.E2d 558, 369 Ill. 566 (Sup. Ct. 1938); Avondale Shipyards, Inc. v. Belcher, 754 F2d 1300 (La. 1985); Houston Lumber Co. v. Skaggs, 613 F.2d 416 (Sup Ct. of N. Mex.1985); Peterman-Donnelly Eng. & Con Corp. v. First National Bank, 408 P2d 841 (Ariz. App. 1965); Rock River Lumber Corp. v. Universal Mortgage Corp. of Wisconsin, 262 N.W.2d 114 (Wis. 1978); cf. Pelican Homestead v. Security First National Bank, 532 So.2d 397 (La. 3rd Cir. 1988).
Cases cited in 50 Am Jur. Subrogation, §107 at note 8. Subordination of Purchase-Money Mortgage special Rule.
See Citizens & Southern National Bank v. Smith, 284 S.E.2d 770 (S.C. 1981); Gluskin v. Atlantic S&L Association, supra; MCB Ltd. v. McGowan, 359 S.E2d 50 (N.C. App. 1987); Southern Floridabanc Federal Savings v. Buscemi, 529 So.2d 303 (Fla. App. 1988); Dickens v. First American Title Insurance, 784 P.2d 717 (Ariz. App. 1989).
Miles Home Div. Of Insilco Corp. v. First State Bank, 782 S.W.2d 798 (Mo.Ct.App. 1990).
Some notable cases related to 2nd's and foreclosure:
In Barnes V Resolution Trust Corporation 664 So 2nd 1171 (4th district 1995) the second mortgagee (lender) began making payments on the first mortgage after the second mortgagee had foreclosed on the second mortgage. Thereafter the first mortgagee sought to foreclose on the first mortgage. The second mortgagee argued that acceptance of installment payments by the first mortgagee from the second mortgagee estopped the first mortgagee from acceleration and foreclosure.
The Court disagreed and stated that "by terms of the mortgage, the first mortgage holder had a contractual right to foreclose when mortgagors (borrowers) defaulted. The first mortgage holder was not obligated to second mortgagees as they were not parties to the first mortgage, nor did they ever assume the first mortgage and there was no evidence that the first mortgagee...induced second mortgagee to continue making payments to satisfy first mortgage.
Also in Travers v Tilton 134 So 2d 807 (2nd DCA 1961), which suggests that to constitute estoppel, the mortgage holder must engage in conduct which intends, or reasonably calculates, to mislead to the detriment of the party asserting an estoppel.
Suggested readings on the issue:
Kravotil and Werner, Modern Mortgage Law and Practice, (2nd Ed. 1981),
Nelson and Whitman, Real Estate Finance Law, §10.5 (2nd Ed. West 1985)
Rosser, "Second Mortgages: Coming of Age," Mortgage Banking, (November 1983)
My point is not to prove right or wrong. The point is to invest wisely.
Simply review the facts, make a wise decision, and above all never take ones word for it! Simply investigate and invest.
Why did I check with my attorney on this for the simple reason that many of my students had questions on this issue and many investors had the same opinions as many that posted replies to this article but in a much more professional manner so when in doubt get legal council.
This is my opinion and I am sticking to it!
John Michael
John, I am attempting to give your response the attention which your position as a "Teacher/mentor/guru" and moderator deserves but I am having a little trouble with some of your citations. I did find the outline by Harris Ominski which was apparently the source of allmost all of these (except for Barnes vrs. Resolution Trust and the Single Family Mortgage Foreclosure Act of 1994) at a website owned by First american companies. Unfortunately my attempts to post the link to that site have somehow set the TCI URL 'bot amok. However at least today a google search on Winter Hill Federal S&L (the first of the cases cited) will turn it up.
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But Mr. Harris's outline is not very complete and is certainly not about the topic at hand. The purpose of his speach (for which the web site posts the outline) was to assist junior lenders in attempting to improve their position in foreclosure and bankruptcy proceedings. The issue of transfer of title does not appear to have been of concern in this presentation. Did you perhaps have more information? Were you present at Mr. Harris's speach? Did that presentation present some basis for your current position which we are unable to fathom from the outline alone?
Even if the citation list were relevant, however, it seems to be muddled. Each citation either lacks a key component or contains a typographical error which has prevented me from actually reading the cited case.
I'm wondering if you managed to run the text of any of these citations to ground and read them to check their relevence to the current conversation? If so perhaps you would care to enlighten us as to how you did so and how they were relevant?
Regarding the Single Family Mortgage Foreclosure Act of 1994 (12 USC sec. 3752) I did manage to chase down the text of this act (the link which you provided doesn't work). This act appears to be authorizing and regulating the secretary of HUD in the foreclosure of HUD insured mortgages. The section is fairly
lengthy. Would you mind a more detailed citation so that we could see what part of this Act you think is relevant to this discussion?
Regarding Barnes vrs. Resolution Trust and Travis vrs. Tilton I did manage to track down your "source" at
http://www.mortgage-investments.com/Investment_in_mortgages/mortgage_foreclosure
_law.htm
But again, their citation appears incomplete. This would appear to be a reference to a state court case but the citation does not include the information of which state. Without that information it is difficult to find the text of the citation. In addition this citation would apear to be to the Westlaw summary and not to the official court record.
Again, have you managed to acquire and review the text of Barnes vrs. Resolution Trust? Would you mind sharing how you did so and how it was relevant to the current situation?
However, it is not clear to me that Barnes, at least on the basis of the limited information available in the summary you have cited, is relevant. The issue in Barnes is whether a first mortgage can foreclose on a second "after the second mortgagee had foreclosed". The summary provided tells us that the the second mortgagee had paid the payments under the first so we must ask on what basis did the first mortgagee
"default" since that default could not have been a matter of not paying? The answer, of course, is that the mortgagee allowed the 2nd mortgage holder to foreclose and come into title thus violating the Due on Sale clause of the first mortgage. In other words, the 2nd mortgage holder became the owner, precisely the situation you said would not happen at the begining of this thread.
So the moral of Barnes would seem to be to be prepared to pay off your first mortgage if you do a subject to transaction either with the consent of the prior owner (a conventional Sub to) or without (via the foreclosure of a junior lien).
Likewise in Tilton the issue is whether the first mortage is prevented (estopped) from forclosing on a second mortgage holder now in title who is making the payments by virtue of the first mortgage holder accepting the payments. Again given that there is no delequency on what basis is the first foreclosing? On the basis of the Due on Sale clause because the mortgagee has allowed someone else (the second mortgage holder or the buyer at the sheriffs sale) to come into title.
Perhaps you would like to explain to John Locke that he didn't really "own" any of those 500 houses he did sub-to transactions on?
By the way, congratulations. This has now become the most commented upon article at TCI. Too bad the comments are mostly about a single error in the article because the rest of it was OK.
The issue being discussed is when the second mortgagee forecloses, is the successful bidder purchasing title to the real estate or simply a note. The issue is NOT lien priority or title free and clear of all liens.
JohnMichael has contended that the successful bidder in this situation is only purchasing a note and does not get title to the property. He has listed summary information that, as has been pointed out, is not relevant to the issue of what the successful bidder is purchasing.
I've done a little research and the following excerpts are from the foreclosure statutes of several states. While each state statute uses different words to express what happens, they do not differ on the bottom line: the successful bidder gets title to the property subject to any superior liens and encumbrances.
Maine: Title 14, Chapter 713, Section 6203-A
"A notice of sale in the above form, published in accordance with this chapter...shall be a sufficient notice of the sale, and the premises shall be deemed to have been sold, and the deed thereunder shall convey the premises subject to and with the benefit of all restrictions, easements,...liens ... and existing encumbrances of record...."
Idaho: Title 45, Section 1506(9), (10), (11)
"The purchaser at the sale shall forthwith pay the price bid and upon receipt of payment the trustee shall execute and deliver the trustee's deed to such purchaser....
"The trustee's deed shall convey to the purchaser the interest in the property which the grantor had, or had the power to convey, at the time of the execution by him of the trust deed....
"The purchaser at the trustee's sale shall be entitlted to possession of the property on the tenth day following the sale...."
Arizona Title 33, Section 33-811E
"The trustee's deed shall operate to convey to the purchaser the title, interest and claim of the trustee, the trustor, the beneficiary, their respective successors in interest and all persons claiming the trust property sold by or through them....That conveyance shall be absolute without right of redemption and clear of all liens, claims or interests that have a priority subordinate to the deed of trust and shall be subject to all liens, claims or interests that have a priority senior to the deed of trust."
Michigan, Act 236, Section 600.3236
"Unless the premises described in such deed shall be redeemed..., such deed shall thereupon become operative, and shall vest in the grantee therein named...all the right, title, and interest which the mortgagor had at the time of the execution of the mortgage...but no person having any valid subsisting lien upon the mortgaged premises...created before the lien of such mortgage took effect, shall be prejudiced by any such sale, nor shall his rights or interests be in any way affected thereby."
Wyoming, Title 1, Chapter 18, Sections 1-18-102, 1-18-109, 1-18-110
"When real property is sold by virtue of an execution, order of sale ... or foreclosure..., the sheriff..., instead of executing a deed to the premises sold, shall give to the purchaser of the lands a certificate in writing describing the property purchased and the sum paid therefor,... or the amount of his bid. The certificate shall state that the purchaser is entitlted to a deed for the property at the expiration of the period of redemption....
"The deed to be executed by the officer to the purchaser...shall contain a statement of the judgment upon which the lands described were sold, and ... a statement of the time and place of sale in the case of a foreclosure....
"Any deed so executed is prima facie evidence that the provisions of law in relation to sale of real property upon...foreclosure, were complied with. The deed conveys to the grantee all the title, estate and interest of ...mortgagor...in the lands thereby conveyed...."
There are several lessons to be learned here:
1. Always do your own due diligence. Don't just accept blindly what someone else tells you.
2. Don't quote some "authority" if you haven't read it.
3. Determine what is relevant and discard everything else that's not relevant.
NancyChadwick-----------You get an A+
It’s not my job to run this train;
The whistle I can’t blow.
It’s not my place to say how far
The train’s allowed to go.
It’s not my job to shoot off steam
Nor even clang the bell.
But let the damn thing
Jump the track . . .
and see who catches Hell!
Do you suppose this thread has jumped the track?
John $Cash$ Locke
Ownership of real estate is granted to a person or persons in several types. The most common type of ownership seen is a grant in fee simple, which grants ownership of real estate to a person absolutely and unconditionally. Such a grant gives the person the right to the entire real estate with power to possess it and to transfer it to other persons.
If two or more persons are granted ownership of real estate, there are several ways they may own it together.
One way is known as a “tenancy in common.” This form of ownership gives the owners a unity of possession with separate and distinct titles to the real estate belonging to each owner. Each owner has a right to separately convey and transfer his/her title to the real estate. If one of the owners dies, his or her title passes to his or her heirs.
A second form of ownership for real estate is known as a “joint tenancy.” In this form of joint ownership of real estate, each owner has one and the same interest in the real estate. The owners hold the right of survivorship, which means that if one of the owners dies, his/her interest automatically passes to the other owners.
A third form of joint ownership of real estate is known as a “tenancy by entirety,” or “estate by entirety,” which has the attributes of joint tenancy, plus the marital relationship of husband and wife. In this form of ownership, the interests of husband and wife in the real estate are viewed as one. There is a unity of ownership with a right of survivorship.
Another form of ownership found in some states is known as “community property.” In a community property state, each spouse to a marriage has an undivided one-half (1/2) interest in the real estate. This relationship only applies to real estate owned by the husband and wife.
Alabama: Alabama recognizes the following types of ownership: tenancy in common and joint tenancy with right of survivorship, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the conveyance expressly states that a joint tenancy with right of survivorship is being created. Alabama Code §35-4-7.
Alaska: Alaska recognizes the following types of ownership: tenancy in common and tenancy by entirety, but not community property and joint tenancy. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a husband and wife create a tenancy by entirety between them. Alaska Code §34.15.120 through .140.
Arizona: Arizona recognizes the following types of ownership: tenancy in common, joint tenancy and community property, but not tenancy by entirety. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the deed contains an express statement that a joint tenancy is being created and accepted by the grantees. A conveyance to husband and wife during the marriage is presumed to be community property, unless expressly stated in the conveyance that a joint tenancy is being created and accepted by the grantees. Arizona Code §33-431.
Arkansas: Arkansas recognizes the following types of ownership: tenancy in common, joint tenancy, and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the conveyance expressly states otherwise. However, a conveyance to husband and wife creates a tenancy by entirety. Arkansas Code §18-12-401, 603.
California: California recognizes the following types of ownership: tenancy in common, joint tenancy, community property, but not tenancy by entirety. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the instrument specifically states that a joint tenancy is being created. In the case of husband and wife, the rules of community property apply. California CC §761, 682-85.
Colorado: Colorado recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the instrument specifically states that a joint tenancy is being created. Colorado Code §38-31-101, 107.
Connecticut: Connecticut recognizes the following types of ownership: tenancy in common an joint tenancy, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the conveyance specifically states that a joint tenancy is being created. Connecticut Code §47-36a.
Delaware: Delaware recognizes the following types of joint ownership: tenancy in common and joint tenancy, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created. Delaware Code §25-311, 701.
Florida: Florida recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated. A right of survivorship must be specifically stated. Florida Code §689.14-.15.
Georgia: Georgia recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created. Georgia Code §44-6-190.
Hawaii: Hawaii recognizes the following types of ownership: tenancy in common, joint tenancy, and tenancy by entirety. Hawaii does not recognize the community property type of ownership, except for land acquired from 6/45 through 6/49. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise expressly stated in the conveyance. Hawaii Chapter 510.
Idaho: Idaho recognizes the following types of ownership: tenancy in common, joint tenancy and community property, but not tenancy by entirety. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created. If the grantees are husband and wife, the real estate is considered to be community property. Idaho Code §55-104, 508.
Illinois: Illinois recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created. In the case of husband and wife, a tenancy by entirety is created. Illinois Code §765-1005/1, 1c.
Indiana: Indiana recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created. In the case of a deed for husband and wife, a tenancy by entirety is created. Indiana Code §32-1-2-7, 8.
Iowa: Iowa recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety or community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created. Iowa Code §557.15.
Kansas: Kansas recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated. Kansas Code §58-501.
Kentucky: Kentucky recognizes the following types of ownership: tenancy in common, tenancy by entirety and joint tenancy without a right of survivorship, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the instrument. Kentucky Code §381.050, 120.
Louisiana: Louisiana does not recognize common law estates. Joint ownership is referred to as ownership in indivision. All co-owners re presumed to be equal. Co-owners may convey or alienate their individual shares, but consent of all owners is necessary to affect the whole real estate held in indivision. Louisiana CC §797-806.
Maine: Maine recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety or community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created. Maine T.33, §159.
Maryland: Maryland recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless expressly stated otherwise. In the case of husband and wife, Maryland law presumes a tenancy by entirety is created. Maryland Real Prop. Art. §2-117.
Massachusetts: Massachusetts recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the deed expressly states otherwise. Massachusetts C. 184, §7.
Michigan: Michigan recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the conveyance. In the case of a conveyance to husband and wife, it is presumed a tenancy by entirety is created. Michigan CLA §554.43-.45.
Minnesota: Minnesota recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety or community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is expressly created in the conveyance. Minnesota Code §500.01, .19.
Mississippi: Mississippi recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the conveyance. Mississippi Code §89-1-5.
Missouri: Missouri recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the conveyance. Missouri Code §442.025, .450.
Montana: Montana recognizes the following types of ownership: tenancy in common, joint tenancy and partnership, but not tenancy by entirety or community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the conveyance. Montana Code §70-1-306, 314; 70-15-202.
Nebraska: Nebraska recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is expressly created in the deed.
Nevada: Nevada recognizes the following types of ownership: tenancy in common, joint tenancy and community property, but not tenancy by entirety. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the conveyance. The community property law applies to husband and wife. Nevada Code §111.060-.065; 123.030.
New Hampshire: New Hampshire recognizes the following types of ownership: tenancy in common and joint tenancy, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the conveyance. A conveyance to husband and wife as to tenancy by entirety creates a joint tenancy. New Hampshire C. 477, §18-19.
New Jersey: New Jersey recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise stated in the conveyance. In the case of husband and wife, a tenancy by entirety is created unless stated otherwise. New Jersey Code §46-3-17, 17.2, 17.3; 3B-11-3.
New Mexico: New Mexico recognizes the following types of ownership: tenancy in common, joint tenancy and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is expressly created in the conveyance. In the case of husband and wife, community property is presumed. New Mexico Code §47-1-36.
New York: New York recognizes the following types of joint ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless expressly stated otherwise in the conveyance. In the case of married persons, a tenancy by entirety is presumed to have been created. New York E.P.T.L. §6-1.1, 6-2.2.
North Carolina: North Carolina recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise expressly stated in the conveyance. North Carolina Code §41-2.
North Dakota: North Dakota recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety or community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is expressly created in the conveyance. North Dakota Code §47-02-05.
Ohio: Ohio recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety created prior to April 4, 1985, but not community property and tenancy by entirety after April 4, 1985. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise expressly stated in the conveyance. Ohio Code §5302.17-.21.
Oklahoma: Oklahoma recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless the conveyance specifically and expressly creates a joint tenancy or tenancy by entirety. Oklahoma Code §58-911-12; 60-74.
Oregon: Oregon recognizes the following types of ownership: tenancy in common and tenancy by entirety, but not joint tenancy and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, except in the case of husband and wife in which case a tenancy by entirety is created. A right of survivorship may be created if specifically expressed in the conveyance. Oregon Code §93.120, .180.
Pennsylvania: Pennsylvania recognizes the following types of joint ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy with right of survivorship is specifically created. In the case of husband and wife, a tenancy by entirety is created. Pennsylvania Code §68-110.
Rhode Island: Rhode Island recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise expressly created in the conveyance. Rhode Island Code §34-3-1, 2.
South Carolina: South Carolina recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a right of survivorship is expressly created in the conveyance. South Carolina Common Law.
South Dakota: South Dakota recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety or community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy with right of survivorship is expressly created. South Dakota Code §43-2-11 through 14.
Tennessee: Tennessee recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless expressly stated otherwise including a statement of a right of survivorship. Tennessee Code §66-1-102 onward.
Texas: Texas recognizes the following types of joint ownership: tenancy in common, joint tenancy and community property, but not tenancy by entirety. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a right of survivorship is expressly stated in the conveyance. In the case of a husband and wife, community property law applies. Texas Prob. Code §46, 451; Fam. Code. §5.01 onward.
Utah: Utah recognizes the following types of ownership: tenancy in common and joint tenancy, but not tenancy by entirety and community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is expressly created in the deed or conveyance. Utah Code §57-1-2 onward.
Vermont: Vermont recognizes the following types of joint ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless otherwise expressly stated in the conveyance. In the case of husband and wife, a tenancy by entirety is created. Vermont Code §27-2.
Virginia: Virginia recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a right of survivorship is expressly stated by the conveyance. Virginia Code §55-20, 21.
Washington: Washington recognizes the following types of joint ownership: tenancy in common, joint tenancy and community property, but not tenancy by entirety. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy with right of survivorship is expressly created in the conveyance. In the case of husband and wife, the real estate is community property. Washington Code §26.16; 11.04.071; 64.28.010-.040.
West Virginia: West Virginia recognizes the following types of joint ownership: tenancy in common and right of survivorship, but not community property. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a right of survivorship is clearly stated in the conveyance. West Virginia Code §36-1-10 onward.
Wisconsin: Wisconsin recognizes the following types of ownership: tenancy in common, joint tenancy and community property, but not tenancy by entirety. A grant of ownership of real estate to two or more persons is presumed to create a tenancy in common, unless a joint tenancy with the right of survivorship is specifically created in the conveyance. In the case of husband and wife, community property law applies to the real estate. Wisconsin Code §700.02 onward; 766.605.
Wyoming: Wyoming recognizes the following types of ownership: tenancy in common, joint tenancy and tenancy by entirety, but not community property. Wyoming Code §34-1-140.
This is my final post on this issue, the facts are the facts and as always when in doubt seek legal council.
This article was written upon my personal experience and that of legal council.
No I am not giving legal advise or the like of just wanted to share based up my experience do with it what you will, bash it, discredit it, make assumptions, attack it! It really does not matter as I still make money-doing business as a real estate investor the honest way!
As an investor one can scream, kick and yell all the way to court that I learned it from? I read it in? So and So said it was ok?
It does not matter, when an investor does not follow the letter of the law a defense of not knowing the law will not hold up in any court.
So take the advise form an old time investor when it sounds to easy, when it does not protect a property owner, when it is not backed by law, when the only one that wins is the investor you have reached an area of danger so seek council from a professional not a book, not a seminar, not a forum! But that of a professional who will back you in a legal action if one should arise.
This is not a discredit to any poster as all have a right to state their position (even me), this forum; books, seminars or the like of as all have their place in the learning process!
As an investor I have dealt with many land trust transaction, made great profits, tough the subject to my students and studied the laws surrounding this form of investing but do I keep doing it because it worked even though law suits are mounting throughout the country on this issue? No, I stop until the dust settles so that I may continue to profit as an investor and not spend a fortune in legal fees!
So let's get on with the business at hand, learning and making money with real estate investing!
So in short, be a wise investor!
John Michael
A very thorough discussion of a different topic, John. But what does it have to do with the issue at hand?
I think this is a very important topic for real estate investors to be informed about. Thanks to all for their insights. However, I now am not so sure I understand the correct proceedures and their consequences.
Can some of you please recommend a published book or resource that can give an outline and a more indepth analysis on this subject?
Terry
I hadn't even read the article until a few moments ago. What caught my eye was the controversy... and since I, too, have spotted a few of your material misstatements on at least 2 of TCI's forums... I was curious.
I read the article and this is what immediately jumped out at me, as it did most well informed readers:
In your article, and I quote, "The highest bidder will own a note." endquote.
Typically, the 'mortgage' and/or 'note' isn't offered for sale at public auction. The property is ordered sold to pay a debt.
In your comment, you correctly assert:
"When you purchase a 2nd, 3rd or even a 4th mortgage in foreclosure "YOU DO NOT OWN THE REAL ESTATE!"
That is correct... but the purchase of a mortgage and note, whether it's in foreclosure or not, is a separate transaction.... outside the scope of a forced, foreclosure auction.
Good Luck with this.