Need Advice From Foreclosure Auction Specialists
I have been buying pre-foreclosures for the past 2 years, but homeowner and bank negotiations has finally burned me out. I am now going to take my capital reserves and start bidding at the auction.
Here is the scenario on the first deal:
Sale Date Feb 3rd:
1st $171K
2nd $80k
3rd $45K
Now the the third is foreclosing. I did do a full county title research on this.
My question(s) is..why would the third foreclose (besides not making payments) when they are dwarfed by the first and second???
If I go to the auction and bid at 45k and win...did I just buy out the third position??
Why would the third even bother to foreclose.....when they are dwarfed by the first and second....what happens when the third forecloses...ie..what happens to the first and second??
Please Advise
They become the winning bidders responsibility.........They do not get erased.......What is the FMV of the place and is it worth it to move forward......also I am pretty sure the sale will kick in the due on sale clause and they will want their money right away..........
the house is worth $450K.
There is plently of equity...I just don't understand what happens in the process to the 1st and 2nd. If I did bid and win, all of sudden I have to start ordering payoffs from the first and the second??? What is the USUAL time frame that one would have to pay for that????
I imagine that holding the auctions, "On the steps of the courthouse" now in MN would be quite an chilling experience. :}--
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The lender forecloses on his security. The senior liens remain in place. The bidder takes title to the property subject to the senior obligations. Many times there's a chain reaction. The 3rd forecloses then the second and finally the 1st mtg holder..Somewhere along the line, there may be a bidder who is financially capable of bringing the senior obligation current and/or refinancing the whole thing. With each succeding foreclosure , the junior liens are "wiped-out" (the legals say, "divestiture"
Maybe there's enough equity there for all three debts. Perhaps the 3rd mtg holder is looking for a bidder to "step up to the plate". Their additional exposure is the cost to foreclose. I doubt that they would payoff the 1st, 2nd, and sell on the open market. I once was the 4th (four) lienholder (I won't do that again) and still
made money.
OK I am going to through a "what if " question out there...using the above referenced message as our example.
The third starts out the bidding at 45K....
Bidding goes up to $250k
does the $215K difference be applied to the first and then the second???? After all the are to be paid before anyone else...or am I way off on this....
It just does not make sense to me why they would bother...ie..court fees, atty fees, etc.
dolph - why is the 3rd foreclosing and why are bothering?
Put yourself in the place of the 3rd lein holder.
If somebody wasn't making their payment to you would you just say okay, I'll just write off the 45k? You would foreclose to recover your 45k. The loan was secured by an asset (the house) the idea was if I loan you the money and you don't pay I will foreclose and get the house. It would then be up to the lender to sell the house and get their 45k back.
You said the house is worth 450k, the total of the 3 mortgages is 296k, that means if the 3rd forecloses and sells the house he will easily be able to pay off the 1st and 2nd and still have 154k left over, (I think that will more than cover his attorney fees don't you?)
If the 3rd is foreclosing, the 1st and 2nd aren't going to do anything but sit back and wait for the check to pay them off from the 3rd who is foreclosing. They are guaranteed their money since they are ahead of the 3rd.
Now this could be a totally different game if the 2nd or 1st was foreclosing.
Say the 2nd was foreclosing for the 80k, the 1st could just sit back and wait to be paid off. However the 3rd would get wiped out. So their might be a bidding war between the 2nd and the 3rd at the auction. However the 2nd would care that much if the 3rd got it because they would get paid off anyways by the 3rd since they are ahead of them.[ Edited by The-Rehabinator on Date 01/30/2004 ]
Rehabinator,
Thanks for your comments.
I understand what your saying..I just don't understand how the process works..to pay off the 1st and 2nd..
What is timeline. What is the my right if I do win the bid..for the third mortgage??
The process of the juniors foreclosing just seems odd.