Buy A Second, Then What?
I am working with a mentor on foreclosures and pre-foreclosures and I've read through the back posts, but I am still not entirely clear on the scenarios of buying seconds. First, buy the second at a discount, then.... 1. One scenario is to show up at the sale, buy the property because others are less likely to bid knowing the second will not be wiped away? 2. Another is to reinstate the first, then foreclose from the second position? When it goes to sale, is anything different from scenario 1? 3. Other scenarios??
Do you usually want to reinstate the first after buying the second? I haven't seen a book just on this topic that could cover it in depth.
PMP,
Number 1 sounds like a grave mistake.
Number 2 seems like you are on the right track.
Not sure of the details, but I do know that no matter who owns the 2nd, if the first forecloses, the 2nd is
wiped out completely.
I believe the GURUs overuse this phrase "wiped out". After foreclosure, the 2nd can still sue the mortagee (garnish wages, etc) individually to try to get their money, the loan just isn't attached to the house anymore. Unless you fight with the 2nd and can get them to settle either before or after foreclosure, they will keep coming after the seller.
Maybe someone with more experience with this can advise?
JohnCl
You are right, John. "Wiped Out" doesn't accurately describe what happens. A more correct description would be 'extinguished' and though the security interest might be extinguished by the foreclosure of a senior lien, the personal promise to repay remains (unless discharged in bankruptcy).
"Number 1 sounds like a grave mistake" -- why?
Hey guys, just a point of clarification here, in Minnesota and many other states, anyone holding a second (or later) lien has time AFTER the redemption period to redeem the property at the sheriff sale amount
With the recent run-up in property appreciation - this is becoming a very profitable business!