I’m looking for everyone’s thoughts on a situation where there is a 1st Lien being foreclosed on for $150K or so, and a 2nd lien being foreclosed on for about $25K. Originally, the 2nd was going to be sold “on the courhouse steps” last month, but was postponed to go on the same day as the 1st (the end of this month). I have a few questions
What is realistically going to happen here, assuming that there are no further stays or extensions - is the 2nd going to be offered before the 1st, will the 1st be offered before the 2nd? If the 1st is offered before the second, and the winning bid is insufficient to pay off the junior lien, will the second be “wiped out” automatically, or is it not wiped out until the first is recorded? Is it possible that if I was the winning bidder on the 1st, that because it was not recorded yet that the second would go to sale as originally scheduled and that I would have to bid on it to keep my interest in the property?
At the end of the day, its a good buy at the aggregate of both outstanding liens, and then some. Any thoughts? Oh, and the property is in The State of Washington, and the owner is 100% awol. Thank you in advance.
If the first goes to sale the 2nd is wiped off title the moment the sale is complete. In California, if the trustee’s deed is recorded within 2 weeks it is by law “effective” as of 8:00am the day of the sale - not sure about Washington.
If the second goes to sale first and you purchase the property you need to be prepared to take care of the first right away. I would take sufficient funds to pay off the first and talk to the trustee before either sale is held to line everything up. You don’t want to be the successful bidder on the second only to have to do it all over again on the first.
This isn’t entirely true. (Varies by State, I am not in Cali, so I shouldn’t say it like THAT, but please read on for my meaning… )
When people say “Once the 1st goes to sale, the 2nd is wiped out” That is NOT exactly true. It is wiped out AFTER REDEMPTION. That is a very important stipulation. (I’m not sure abotu Cali) In Michigan, we have a 6 month redemption period. If someone redeemed the 1st mortgage, the 2nd would come back as a legitimate lien. It is only after the redemption period has expired that the 2nd lienholder’s rights are wiped out.
I am NOT sure if this varies state by state. I am going off of Michigan. I am assuming that it is the same in other states w redemption periods.
disclaimer I’m not a lawyer, just a guy that’s been in the real estate industry and title insurance field for 10+ years, and only work in Michigan.
Washington doesn’t have a redemption period unless it is a judicial foreclosure (which doesn’t happen very often here).
I just don’t want to be winning bidder on the 1st, and have the 2nd go to sale right after me (assuming the first was not sufficient to have proceeds to pay out the 2nd as well.)
As you pointed out there is no redemption period in Washington to be concerned with. If you are the winning bidder on the 1st you needn’t be worried about the second. If the second did hold a sale after the first it would not be valid.
This is correct. If there is no redemption period, the second is indeed wiped out at auction.
So, now that we are in agreement that if the first goes, the second is wiped out.
Now, if the second goes to auction prior to the first, would anyone in their right mind bid on the second knowing that they would have to satisfy the first as well to take control of the property. It seems that it would make more sense to just sit tight until the first goes up for auction and hope that you can get it more cheaply than if you bid on the 2nd and then bid on the first as well.
Now, if someone did have the winning bid on the 2nd DOT, what are his options to ensure he gets the property? Can he just have the cash ready to pay off the first on the spot to the trustee foreclosing on the 1st?