Foreclosure Aucton Is 21st...should I Wait To Buy From Bank?

mpotter profile photo

Hello:

I am new to this site and to real estate investing in general...ths is our first forclosure. We really want a house that will be auctioned on the 21st of this month at the county courthouse. Can't track down the owner but did find out through public records that this house is mortgaged to the hilt not to mention additional liens on it making the debt against it far more than what it is worth if it was even in excellent condition. The house needs about $50-60K worth of work we think at this point but have not yet had it inspected of course (lots of water damage but we think we have identified why and where it is coming from ...my husband is a contractor).Anyway, the county is auctioning it May 21st and has the mortgage company listed as the plantiff. Knowing that there is such a large outstanding balance on the mortgage, I have been told that the bank will most likely get it back at auction and we can then make an offer directly to the mortgage company.

Here is what I need to know now...is that typically how it works? Will I be able to make an offer to the bank within 24 hours of them getting it back? Any advice? Does the bank clear the title when they sell it even if there are other liens against it for smaller amounts like $38K and 7K. Any thoughts, suggestions or advice is greatly appreciated. I have fallen in love with this house and we woudl actually fix it an dkeep it and probably rent our current home out. Thanks so much!! :-?

Comments(24)

  • mpotter9th May, 2004

    Let me add a couple of questions to my posting and please forgive me for being such an amateur...

    - Last mortgage on record with county is with Chase but trustee for sale (auction)is Citi. ve been in contact with comeone at the REO dept with Citi that said she will not see it in her file until close of auction. She did howver say that 9 times out of 10 they get their houses at the end of an auction. Now I am trying to understand...does Citi has the 1st mortgage or Chase? Maybe Chase sold it to Citi?
    - I have the attorney info for Citi for this auction. Should I contact them to try to buy it now? Then what happens the 2nd mortgage and the other lien?I really want this home for my family and know the max amount my husband and I are wiling to pay. I have 38 photos detailing the damage to the home.

    - Is there a way to get it inspected at this stage in the game without current owners permission (cannot find him).
    -What should I do to get this house?
    Thanks again for any help I can get!

  • mpotter9th May, 2004

    Thank you for your answer. We will definately be calling an attorney tomorrow to make an appointment. Let's say the auction closes and the mortgage company gets it. Then the bank owns it. Then let's ay I make the bank abn offer and they accept. I buy the house from them, close on it and fix it up. Can the person that owns it right now still redeem it? This is all so confusing. I havd no intentions of evben trying to buy a foreclosure until I read and studied more and was not even looking for a home right now. This one really fell into our laps - LONG story.

  • mpotter9th May, 2004

    Also, 1st mortage is the one that is foreclosing.

  • loon9th May, 2004

    When you're talking to the attorney, ask her how to extinguish the previous owner's interest completely (and thus redemption rights, if they exist in SC). I've used a Quit Claim deed to buy out their interest--you can offer some token payment, maybe $100-500) to them to sign away any remaining rights--and that's worked fine for me. Of course, you've still gotta track them down or wait the full redemption period before beginning work.

    Also, your state might have a shorter redemption period for 'abandoned' properties; mine's is 5 weeks as opposed to 6 months for a normal redemption period. It was initiated so they could go in and clean up obviously abandoned meth labs, but could be used in your case as well. Good luck; let us know what you hear!

  • cjmazur10th May, 2004

    don't forget back property and State for Fed. liens.

    This (atleast in CA) are not wiped at the Trustee sale.

    Confirm also if you need "all cash" at the time of auction, meaning if you buy it for 65K, you need "cash" totaling 65K.

    Good luck. I have seen some amazing deals and some dogs.

  • mpotter10th May, 2004

    I found out today that it is basically too late for a short sale and tracking down the owner doesn't seem to be happening anyway. I was told by the mortage company that once the auction is over, I have 10 days to go into the courthouse and "upset the bid" by offering 5% more than the bid. I was also told today by the mortgage company's attorney that if I bought it at auction the debt to 1st would be wiped out IN ADDITION to liens, 2nds, taxes, etc. I thought this seemed strange becuase my understanding is that I will be assuming all debt against the house except for the first mortgage (they are the trustee at auction). Anyone know how this works in SC, specifically Charleston? HELP please. :-?

  • cjmazur10th May, 2004

    don't forget back property and State for Fed. liens.

    This (atleast in CA) are not wiped at the Trustee sale.

    Confirm also if you need "all cash" at the time of auction, meaning if you buy it for 65K, you need "cash" totaling 65K.

    Good luck. I have seen some amazing deals and some dogs.

  • JeanMeadows10th May, 2004

    Hi,

    All you really need is a few little documents. 1 is an Non-Cir. 2. is Equity Purchase Agreement 3. Auth for Disp. and 4. (Depending on which state you are in) a Real Estate Sales Agreement! There is a specific order they should be done in... This method of doing an NOD can save you a lot of money on Title and Closing Fees too!
    :-D

  • JeanMeadows10th May, 2004

    Quote:
    On 2004-05-10 21:09, mpotter wrote:
    I found out today that it is basically too late for a short sale and tracking down the owner doesn't seem to be happening anyway. I was told by the mortage company that once the auction is over, I have 10 days to go into the courthouse and "upset the bid" by offering 5% more than the bid. I was also told today by the mortgage company's attorney that if I bought it at auction the debt to 1st would be wiped out IN ADDITION to liens, 2nds, taxes, etc. I thought this seemed strange becuase my understanding is that I will be assuming all debt against the house except for the first mortgage (they are the trustee at auction). Anyone know how this works in SC, specifically Charleston? HELP please. :-?


    Is the house worth more than the amount owed and is there enough margin if the bank sells it under market value to make the lost money back and increase by a 30% profit?

    If you have a purchase agreement with the homeowner and then work the short pay you will be better off.. Never let the bank know you are willing to buy the house until it comes down to the wire. They are willing to take the short pay to off set the long term loss.

    grin

    Jean

  • GeneralSnafu12th May, 2004

    The mortgage holder told you correctly. If you buy it on the courthouse steps all motgages, including the first will be wiped out. The difference between the mortgage holders is that the holder of the first in this case will receive the proceeds of the sale up to the amount of their judgment.

    You are making one huge mistake on this property in the fact that you have allowed yourself to fall in love with it. That may cause you to make some decisions based upon emotion rather than logic. BEWARE.

    Quote:
    On 2004-05-10 21:09, mpotter wrote:
    I found out today that it is basically too late for a short sale and tracking down the owner doesn't seem to be happening anyway. I was told by the mortage company that once the auction is over, I have 10 days to go into the courthouse and "upset the bid" by offering 5% more than the bid. I was also told today by the mortgage company's attorney that if I bought it at auction the debt to 1st would be wiped out IN ADDITION to liens, 2nds, taxes, etc. I thought this seemed strange becuase my understanding is that I will be assuming all debt against the house except for the first mortgage (they are the trustee at auction). Anyone know how this works in SC, specifically Charleston? HELP please. :-?

  • loon13th May, 2004

    Good advice on not falling in love with the property, disconnect and fall in love with the deal...unless it's not for investment and your sole goal is to get the property. Also know that any lienholder, "wiped out' at sale or not, probably has redemption rights, just like the owner. Though unlikely, a lienholder could crawl out of the woodwork after you've fixed the place up and say "thanks for fixing it up so nice for me, I redeem!" You'll get your original purchase price back, but not any improvement value you added.

  • commercialking13th May, 2004

    Ok, calm down a little.

    How much is the first mortgage?

    How much are you willing to pay?

    What do you think the house is worth on the open market after renovation?

  • mpotter13th May, 2004

    Thanks for all of the responses. I need to clarify...this house would be for me and my family so when I say I have fallen in love with it, I do not plan on selling it for a LONG time.

    Owner moved out of state and apparently does not want to be found by anyone so a short sale is not an option. Still do not really understand what debt or risk I inherit if I buy it at the courthouse steps. I was told the bank (plantiff in this case) ALWAYS bids up to the amount owed to them, in this case $266,000 on the 1st and the defendant is a 2nd for $37,000 (roughly).

    The house is in BAD shape and is not even worth $266K right now....might be worth $200,000 and that's really pushing it. My attorney suggested buying it from the bank after they get it at the auction - if they get it. But if someone else goes to the courthouse and bids more than $266K, more power to them - that is too much for this property.

    So I will be going to the auction as an observer and hope the bank gets it back. Then I will submit an offer to the bank. Please let me know if I am incorrect on this whole process or if I should be doing anything differently.

    Thanks again!

  • mpotter13th May, 2004

    I also checked on redemption rights...they have none in SC.

  • loon17th May, 2004

    When you submit your post-auction offer, know that the bank--unless it's a local one that may have a director who wants the house too, or some other reason--will probably just list it with a Realtor and try to recover what they can. With no redemption rights, they may move fast to list it, so be ready. If you know it would only fetch, say, 220 on the market as is, you can roughly calculate their marketing costs--Realtor commission, appraisal, closing costs, etc., maybe 8-10%--and base your offer on that; maybe 200k in this scenario. If they counter, you're halfway there.

    Talk to the attorney who bids for the bank. Probably just a hired gun, but he/she may give you insights, esp. if you follow him/her to the courthouse where they'll file the deed immediately/ Ask seemingly innocent, gee-whiz questions at first, then try to get info about who to contact at the bank.

    If you know a Realtor or can navigate your assessor's office system (maybe comps are online; they are in some places!) or have a good sense of values get some comps anyway because the bank or their Realtor will when they sell it. You may not get to put together a full SS package, but the easier you make it for them to sell, the better your chances (accepting 'as is,' for example, is a plus) of getting it. Good luck!

  • ggold14218th May, 2004

    With the numbers as you describe them, you are correct in planning to go back to the bank after the sale (it's very unlikely anyone would bid on it if your numbers are accurate). The foreclosure sale will wipe out the junior lienholders. You'll want to see the title before you buy, of course, to make sure there are not other liens that weren't wiped out... IRS and Local Improvement District liens if any are not wiped out at the sale.

    You'll want to document the damage and repairs needed with photos and a repair estimate from a contractor, along with recent sales comps, to present along with your offer to the bank, so they have enough info to make an informed decision to accept your offer. Start out low.

    Good luck!

  • mpotter20th May, 2004

    Wow, you are all so helpful. Thanks so much!

    Lasty question (maybe). At this point I am becoming a little concerned that there is some hidden damage that we cannot be sure of without an inspector. Will the bank be willing to look at our offer if we have a contingency clause that it must be structurally and electrically sound. What is it that banks love to see on ano offer other than $$$ and what do they immediately turn down when they have an REO that they need to unlaod?

  • WiForeclosures22nd May, 2004

    If they are truly liened up the ass do this...

    Go to the sheriff sale, let the bank bid. They will bid what they are owed and nobody will out bid them because it is for some outrageous amount. Then run up the bank attorney/whoever else came from th bank to watch them not get outbid....approach them before they leave the court house and tell them that you are interested in the property. (The bank doesn't own the property yet, there has to be a scheduled CONFIRMATION of sheriff sale)
    Get somebody's business card, get a fax number, and fax them an offer with contigent on confirmation of sheriff sale.

    You know what they bid,, you knw it was for too much, submit an offer for whatever you feel is justifiable. Research the property taxes, stipulate that they pay all property taxes in full, or offer even less, and take care of taxes on your own.

    In some cases a bank may have already have a contract with an REO asset managenent company/who contracts out to a realtor. They may not be interested in your offer, and you may have to purchase throught the listing agent. but in that case you can still submit an offer for whatever you want. The worst the bank could do is not accept it, or counter you back for more, (and then in that case you don't accept it)

    But remember, the sheriff sale has to get confirmed first. The bankdoesn't own it until then

  • WiForeclosures23rd May, 2004

    hah ha, this is kind of funny. A foreclosure with hidden damage? Have you ever been in a foreclosure? These people lost their house remember.
    Familiar with the expression "prepare for the worst/hope for the best" These places will have cement poured into plumbing. They will have basement walls buckled and wet basements, they will have ceiling fixtures town out. Heck, they might have even set off fireworks and grilled inside the home. People being foreclosed on usually always trash the place beofre the sheriff sale. Unless they died or something Maybe consider contacting a realtor, tell them you are interested in REO, foreclosures ets. There are usually wasp nests, dead animals, piles of garbage etc in these places. Sometimes they have been vacant for over a year and weren't winterezed and plumbing has burst.


    When you purchase an REO from a bank you sign all kinds of addendums. As-is, they have no knowledge of anything, you can't hold them liable for anything etc... Don't get inspection contigency crazy or they will shred your offer. Trust me they will gladly take a cash offer with no inspection contigency than waste their time on an offer for more money with all these ways to back out of the deal...


    Wow, you are all so helpful. Thanks so much!

    Lasty question (maybe). At this point I am becoming a little concerned that there is some hidden damage that we cannot be sure of without an inspector. Will the bank be willing to look at our offer if we have a contingency clause that it must be structurally and electrically sound. What is it that banks love to see on ano offer other than $$$ and what do they immediately turn down when they have an REO that they need to unlaod?

  • mpotter1st June, 2004

    Well the bank did get it back and they have alreay contacted an agent. we have contacted our agent and put together an offer but we've been told it has to go to their agent and their agent does not yet have the paperwork from them...said it sometimes takes several weeks. Thanks again for all of the help. Does anyone have a Web address for Citi Mortgage foreclosures?

  • mykle1st June, 2004

    If this offer fails I would suggest dumping your agent and working strictly with the listing broker, he gets the full commission that way and his greed will help your cause. The REO department holding the place probably doesn't know the local market and the brokers opinion will carry a lot of weight. Make your contingency a general one based on an inspection, don't limit it to any specific inspections, just a simple 10 days to complete inspections.

    I think you are being too eager, but when you are buying something to live in I guess that is understandable, and if you pay a bit more than the lowest possible amount it's ok too, been there, done that, no regrets. For future refrence, get friendly with the listing broker, he probably knows the banks bottom line and during the course of a conversation would probably hint at it. He surely has a list of buyers and a few phone calls telling them he wants bids could make a nice package of bids with yours standing out as the best one, now the bank doubts their pricing and thinks yours looks good, based on the lower offers. etc etc.

  • GeneralSnafu1st June, 2004

    Several weeks? You are joking? The agent for the bank is stalling you hoping they will find a buyer and not have to split commissions with your agent and his/her brokerage. Get your agent to submit an offer NOW. Don't give the bank more than a day or two to respond to your offer. Include in your contingencies that you want your agent present when the offer is submitted to the bank.

    Quote:
    On 2004-06-01 21:09, mpotter wrote:
    Well the bank did get it back and they have alreay contacted an agent. we have contacted our agent and put together an offer but we've been told it has to go to their agent and their agent does not yet have the paperwork from them...said it sometimes takes several weeks. Thanks again for all of the help. Does anyone have a Web address for Citi Mortgage foreclosures?

  • bgrossnickle1st June, 2004

    I do not know about "upsetting the bid". that must be a SC thang.

    But if the bank buys the house, just let it go. unless it is a small neighborhood bank, the bank is not in a position to deal with retail buyers. they will put the house through their greased and streamlined program to get it listed on MLS. You might get a deal once it is listed on MLS, but not likely.

    Brenda

  • mykle2nd June, 2004

    snafu, it depends on what they are really talking about when they say it will take several weeks. If the state has a redemption period that may be the hold up they are refering too. I know here the broker is identified very soon after the sale, but it will be 3 months plus before the property is actually available. To me it didn't sound unusual. I do agree the listing broker would sure like to sell it himself and by making an offer before the property is available it gives him alot of time to find another bidder, how hard he would really try depends on how busy he is, how good the offer is etc. If the place is already listed on the MLS, showing up on www.realtor.com etc then I agree completely with snafu.

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