Re-foreclose Junior Lien, Anybody Done This?
Re-foreclose junior lien
Here’s my situation
I have purchased a foreclosed property at auction in Florida.
The good part is, I purchased a 1st mortgage foreclosure
The bad news is when my title company did a title search they found a junior lien that was not foreclosed out in the complaint. I have a contract to sell the property at a nice profit that should close in 3 weeks.
I believe my options are:
1. Worst case: pay the lien at closing, about 10k, I would still make a nice profit
2. Hire an attorney to re-open the case and re-foreclose the junior lien.
How long would this take and how much would it cost?
Or
3. Call the junior lien holder and see if they would settle for about 20% of the lien.
I expect they would be interested because they risk getting nothing if I hire an attorney and re-foreclose them out
Has anybody done this before and are there any other options to consider here?
Thanks for any and all responses
David
Just so I am clear...
The senior lien foreclosed.
Somehow the process was not correctly handled so the junior lien is still there. I am not expert on this so I am not sure how this could even happen. Was there a problem with the notification so that the junior lien holder did not know? Even if that is the case, is the junior lien still valid?
A session with a lawyer should tell you a bit more or maybe with a title company.
I definitely would speak with the junior holder and explain that their position could be worthless. Ask them what they want to do? Let them pay the legal costs to figure out if they have any options.
You might have to delay your sale or leave money in escrow to deal with a possible claim. Again, the title company can tell you about this.
John
[addsig]
John,
The junior lien was missed in the foreclosure lawsuit or complaint by the plaintiffs foreclosing attorney. The lien didn't show up in their title search or the somehow didn't bring them into the lawsuit as a defendant. So I must re-foreclose them or settle the lien. The lien is valid, good for 5 years and it is about to expire next month, but they can re record it again for another 5 years.
This is something that happens quite a bit and definatly should be part of your due diligence before buying a property.
When purchasing a foreclosure property at auction (or purchasing a 1st position note with the intent to foreclose) you should:
1. Order title
2. Verify that there are no unknown senior liens
3. Verify that all junior liens have been served proper notice in the foreclosure lawsuit. This is very simple--just see if they are a named defendant in the origional complaint.
I think this will be a lesson learned and that you will have to pay the 10 grand. Unless you can accurately and factually support an as-is value of being low, they realize that there is equity and if push comes to shove they are in a very good security position.
The only deal here, as I see it, would be something in regards to the foreclosing attorney. This is negligence on their part. I would surely pursue this but not to court. It is very expensive to sue an attorney...lol.
GOOD LUCK and welcome to the school of hard knocks. Your first year's tutition is paid in full
I would double-check with an attorney; I don't know your state's laws but if it was foreclosure by advertisement then the lien may be wiped out regardless if they were served although they could always fight it and cost you much more in attorney's fees. I'd say make them an offer. I doubt they would have redeemed anyway for such a small amount.
Quick question dsREI just got a property from a foreclosure auction and found out that a junior lien still exist, ok now lets say that dsREI does not want to pay for it, what would happen then?
In other words what can the junior lien holder do? Foreclose on the new owner (dsREI), meaning dsREI will lose money, and he has to pay it no matter what, unless he wants to lose the house.
Or, the junior lien holder only has the right to redeem the property, meaning pay dsREI for whatever he paid for at the auction (only time wasted)?
I was also wondering what if this property is a 2nd mortgage property, and there is a senior lien that still exist, maybe a 1st mortgage and tax lien, what will happen, will they foreclose or just redeem???
Can an owner of a property bid at his own property?
I am a newbie in this, so please hold the laughter. Thanks.
Thanks for all replies
I have sold this property and make a good profit + 30k
How did I solve the junior lien?
I contacted the junior line holder and told them that if they didn't accept my offer of $1800.00 as paid in full for a 9k lien and record a satisfaction then I would have my attorney re-foreclose them out as a junior lien holder to the complaint.
The Lien holder was very interested in recovering some of the money, some is better than nothing.
I have never had to re-foreclose a 1st mortgage foreclosure am I not sure what it would it cost in legal fees or how long it would take. I live in FL
I will find out from my attorney what the process is like and how long it would take.
Be certain that all defendants listed on the title search have been served and they are defendants in the lawsuit (check the complaint) on a judicial foreclosure in Florida.