Pre-foreclosure, Short Sale
I'm looking at a deal to purchase residential property that is in a foreclosure process. I don't have exact details, but there is a first at at 300,000, a 2nd at 200,000, and a third at 150,000. The property is only worth about 500,000. What are my options? Do I buy it from the bank with the owner's permission? How does everyone get paid (i.e. first? second? third?)? I would like to purchase the property at around 350,000.
From what I have learned so far -- you need to determine which lien is actually calling the foreclosure. In California, if a JR LIEN calls the foreclosure, the SENIOR LIENS still have an interest on the property and can seize it if the lien is not paid. I'm not sure if it is the same in other states -- experienced REI's please clarify.
However, if the 1st LIEN calls the foreclosure, then all JR LIENS are wiped out except for any TAX LIENS which always supercede any mortgage.
If you pay off a JR LIEN, you will most likely have to SHORT SALE the other 2 liens.
If the 1st LIEN is calling the foreclosure at $300000 with comps at $500000, it looks like you might have found a good deal. Hopefully, the 3rd lien is not a TAX lien.
Looks good on paper -- I wonder what the Experienced REI's think
My understanding of the foreclosure process (at least in North Carolina) is that the proceeds from auction over the amount of the lien that is foreclosing would go towards payment of the other liens in their correct order. The exception to this is that an IRS lien would move to second place and a state tax lien would move to third position. If any other liens exist where tax liens use up the surplus funds from the auction, they would then be wiped out.
Assume the lst TD is foreclosing. Check date of recordation to see if it is really prior.
1 method. Bid the first at the Trustee sale.
Yes it will eliminate IRS and State Franchise Board liens if they are Junior.
Deal looks so good, that I would cut my risk. Approach the second and see why he is not forcl and advancing to the first. Many reasons check it out. If possible buy the second for a terrific discount. Cure the existing foreclosure. Bring it current. Now start forcl from the second and substitute in a (captive Trustee) to conduct the sale, proper notices etc. Now you control the sale. You can postpone if too many highly qualified biders are at the sale. You can credit yourself with the full unpaid amount due on the second which you probably bought for 5cents on the dollar. If an idiot yes there are some overbids the full amount of your second, consider giving it to him and pick up the 90% profit on the face of your second.
Now thats a lot of fun and pays for your
next trip around the world. Cheers Lucius