Need Advice on Sheriff Foreclosure Sale
I am in PA and the home across the street is going up for seriff's (1st mtg forclosure) sale and I want to own it.
Here's the info I know (because I talked to the owner):
1st mortgage = $96,000
2nd Mtg (HE loan) = $60,000
Market Value of Home = $120,000
Tax lien = $2000 (negligible)
Other liens may exist
The owner is filing bankruptcy
Here are my main two questions:
(1) If I bid on this home and I win, I know that the 1st mortgage must be satified, but will I also be responsible for the 2nd mtg? ...or any other liens?
(2) How do you think the bidding will go? I have NO experience with a sheriff's sale but the way I figure, the 1st mtg lender would only bid up to what is owed to them (and no more), and the 2nd mtg lender wouldn't bid at all since anything over the 1st mtg would go to them anyway. They MAY bid just to drive the price up, but then they are taking a risk.
Please give some advice on these two items; the sheriff's office couldn't give me straight answers ESPECIALLY on whether I'd be responsible for any other liens besides the 1st mtg and taxes. They didn't seem to want to help.
I fear bidding on it (and winning) and then getting hit with hidden liens. Also, if all liens are wiped out except the 1st mtg, then why would I care about other liens?
THANK YOU very much in advance everyone! I have little knowledge about sheriff's sales and need some help. Thank again.
-Tony
Hey tony17112acst,
The owner is filing bankruptcy:
I thought a bankruptcy would stall/postpone a sale?...not sure
Here are my main two questions:
(1) If I bid on this home and I win, I know that the 1st mortgage must be satified, but will I also be responsible for the 2nd mtg? ...or any other liens?
It's my understanding that the 2nd lien will be wiped out, gone.
I fear bidding on it (and winning) and then getting hit with hidden liens. Also, if all liens are wiped out except the 1st mtg, then why would I care about other liens?
Do a tract and Judgment search on the prop....or...a full search if you're determined to get this prop. a small price to pay for a potentially $60k wipe out.
What condition is the house in?
When is the sale due?
Is the mortgage in arrears and if so, how far?
Hope this helps,
Clif [ Edited by pbodys on Date 06/10/2003 ]
The house is in good condition on the exterior but the interior needs rehabbed.
Also, the home is empty.
The sale is on 7/10/03.
I dont know if the mtg is in arrears, but $96,000 is owed on it.
Thanks!
Could anyone give their opinion on this?
Thanks!
Oops, Forgot to mention: I DID find out that the 2nd mtg is wiped out (unless the winning bid is over the amount of the 1st mtg).
Also, I will have to do a title search which will reveal liens attached to the property, however, how does one know which liens will carry over?
The most interested question I have is: how is the 2nd mtg holder going to bid? If the market value = $120,000 and the 1st mtg = $96,000 and 2nd = $60,000, would they even bid over the 1st mtg amount since every dollar they bid over that amount will just go right back to them?
Thank you in advance.
thats kinda sad u wanna make a move and no experienced investor will respond.
I'm not sure but if you buy the first i think the second will go away
check to be sure
you wanna sell it thought before the sheriff sale. Make sure there is enough equity in the loan balance and the market value to make you some money. Even if its just $2000 or $3000 dollars. Get ur cut and walk away you get paid plus experience points!
Just starting out i would recomend selling right out to get some experience first.
Does anyone have any advice on this matter?
Thanks in advance.
How will you make money in with this transaction? If I understand your email, the house is worth 120k. If the first is 96k, and let's say that the 2nd doesn't buy it (they will be probably be there to bid) and that you get it for the 96k, you still have to rehab. If you want to rehab and sell, you might want to consider your holding costs, and if you sell through a realtor, your realtor fees. Also, in MN where I live, we have a right of redemtion period of 6 months. If the house is vacant, you can push that 6 month period up a little, but you still have to wait. Going to court of course costs money....
I have heard, from many different people, that a BK will prolong the inevitable. Meaning that the homeowner will be evicted but it does delay the process. When you buy it, you have to come up with cash.
I have done a few deals (about 8 so far) and have walked away from many. Unfortunately, this one may be one that you may want to walk away from...
Just a thought.
In Ohio Sheriffs sales state that all encumberances and leins will be removed by the sale and you get a clear title. They have to have rules and guidelines for the sale, go back and ask for a copy of them.
That being said, I have rarely seen a decent property go for less than 80% of appraised value at our sales, so there is not much equity with the purchase.
If they do not warranty a clear title I would run, not walk, to the nearest exit. This property has too many potential problems to risk an unknown. There will always be another property, but if you get stuck in a problem deal it may sour you from investing forever.
Newinvestor, thanks for your reply.
As far as making money, my desire is to own it, rehab it, and then rent it out indefinately. The FMV currently is about 120K but totally rehabbed, it would be about 145K. So, I do have the option of rehabbing it and selling it for a profit (something I've done about 5 time ...and without a R/E agent/fees).
Also, I do have the cash to purchase it at the auction h in PA you need all the cash by 12:00 noon which is totally outrageous).
My line of thinking concerning the 2nd lender is that they would bid only up to the FMV ...since 96K would go to the 1st mtg and anything over that would go to the 2nd lender themselves. I can't imagine them bidding over the FMV (120K) since they could only sell it for that.
I wanna own this house and I'm willing to pay up to 120K for it, I just don't know what the 2nd lender will do at the auction.
I plan to pay for a title search to find out what the liens are to know what the total cost of the home would be, but before I pay for it, I was just wondering if the 2nd lender would automatically outbid me and thus I'd be wasting my money paying for a title search.
Any thoughts? ...about how the 2nd lender will bid?
Thanks!
btw new ...I lived in Owatonna, MN for 7 years.
Quote:
I wanna own this house and I'm willing to pay up to 120K for it, I just don't know what the 2nd lender will do at the auction.
Why do you care? Come prepared to pay $121k (or whatever your absolute maximum is, if it's higher than that). If the 2nd bids $120k you can still buy it. (Does the 1k really make any difference to you? The agent for the 2nd is given a very hard limit - he can't just bid a few dollars more than that.) If the 2nd stops at, say, $110k, you've made $10k.
Quote:I plan to pay for a title search to find out what the liens are to know what the total cost of the home would be, but before I pay for it
You can research the liens yourself. Just check with the county. Liens have to be filed.
Quote: I was just wondering if the 2nd lender would automatically outbid me and thus I'd be wasting my money paying for a title search.
If you ever find a way of reading minds, let us all in on the secret. You have to assume that they will, since you have no way of knowing how high they're planning to go.
Quote:Any thoughts? ...about how the 2nd lender will bid?
Anyone who says he knows is lying.
Good luck.
Any thoughts? ...about how the 2nd lender will bid?
No, though I would think that the lender would show up and bid.
btw new ...I lived in Owatonna, MN for 7 years.
did you ever buy/ sell properties in Owatonna?
Have a great evening, and good luck. I would be curious on how it turns out. Feel free to email me at: **Please See My Profile**
Derek
We recently purchased at an auction in Washington State (first and last I hope!). I can tell you what I learned, for what it is worth. Keep in mind, it may be different in your state.
A few days before the sheriff sale you call the Trustee and they will confirm the date of the auction. They also have an opening bid, which is, I believe, the least amount the foreclosing bank will take. What we also learned is there may be a minimum bid amount, which is the least amount the bank will take from a third party (you). In our case we knew that the bank holding the second was being difficult and forcing the foreclosure. We tried to purchase it through a realtor on a short sale and the second refused to sign off on our offer, which was a very good offer, btw. We were nervous about them bidding at the auction as well but were put somewhat at ease with this line of thought. The bank holding the second has not had the opportunity to see/research the property. While they would know the value and, depending on how old the loan is, have an idea of the condition of title, your first-hand knowledge of the property condition really makes your position less risky. Depending on how much property they have on their books, they may not be in a position to add to their inventory for such a small margin - especially if they don't know the condition. Remember, if they buy and resell, there will be additional costs, including realtor fees, repairs and holding costs. Putting yourself in their shoes, would you be willing to risk it?
At the auction, one of the two banks holding leans (I presume the second) has an opportunity to offer the opening bid amount. The paperwork we received clearly stated the name and an empty blank where their bid would have been recorded. The day of the auction you can call to see if the auction has been postponed (usually due to a bankruptcy filing). What we did in terms of bidding, is this. We knew the minimum bid for us to purchase it, and we knew the maximum we were willing to pay. We brought a cashiers check for the maximum, bid the minimum and had a refund for the balance returned. It was fairly smooth.
One last thing. Make sure you know who the auction company is. Several companies could be running auctions at the same time, so you want to get to the correct one. Get there early to check in. At that time you can meet the auctioneer and scope out the competition, should there be any!
Best of luck to you.
Thanks very much for your advice with your experience.
Does anyone agree with my prediction on how the 2nd mtg lender would bid in this situation? Review: FMV=120K. 1st mtg=96K, 2nd mtg=60K and the 1st Mtg is foreclosing.
In this case, would the 2nd mtg lender bid up to the 1st mtg amount or up to the FMV of the home?
I think they'd bid up the the FMV if I'm bidding against them. Anyone disagree?
Thanks!
Hi
I have been to and bid on a few prop. in pa sheriff sales (lehigh county) I think from what I have seen, that you'll have a shot at that property for about 98-100k
best wishes. Let us know how you do!