2nd loan trustee's sale info needed

Hi Gang,

A property I’m interested appears to be going to trustee’s sale. It’s the second loan that is in default - the first is current.

Two questions:

  1. If I bid on, and win the bid for the second loan, does that give me control of the property or does the fact that the first is current mean the owner retains control?

  2. It appears that the owner does not reside in this property but someone definitely lives there. That leaves the possibility of there being a lease on the property that would inhibit my taking possession. How can I find out the details of the lease, other than asking the occupants? I doubt these people would give me a straight answer considering he circumstances. For all I know, there could be a 100 year lease at $1 a month!

Thanks in advance for your help!

Howdy Katsdaddy:

A foreclosure sale will give you ownership of the property whether it be the 1st, 2nd, 3rd or whatever loan position. The sale has to be valid. I have seen a few where the tax office gave the constable info that was not correct and the property was sold at the steps to satisfy a judgement and the sale was not held up because the property had sold prior to the foreclosure and prior to the judgement.

Leases on foreclosed property are voidable. Any you can usually ask for possession with a 30 day notice. One caveat is that in court a judge or jury may not care that you bought the house and let the tenant stay even if they have not paid the rent. Hopefully rare but I have lost in court with a deed in hand and the tenant swore he paid the previous owner and was believed. He did not pay the next month and back to court we went where he finally agreed to move out but took as long as he possibly could.

Hope my bad experience may save you some grief.

Thanks Ted. The consensus on most forums I’ve seen or written to seems to be that leases are voided upon foreclosure.

So. now that I have that. I’m trying to think of a good ruse to get occupants to let me into the house to see it. I’d try bribery if I thought it would work.

One person suggested offering a free rug shampoo, but when I think back to all the times someone offered that to me I turned them down every time.

Howdy Katsdaddy:

You are right about leases. You may be able to just talk to the tenants and let them know that another buyer may not let you stay there and the baks generally do not want to be landlords and will vacate the property most of the time.

A lot of foreclosures are bought without going inside but make sure you have some good equity for the unknown problems that will arise. You always figure carpet, paint and several hundred for misc repairs. Ac can too be a big expense and id it is old you can bet on replacement costs too.

Hope this helps a little.

Thanks again Ted. I have a problem with telling them I’d let them stay when that would be a bald faced lie, and could invite vandalism later.

On the profit margain, I don’t need as big a margain becuase this will be my own residence I’m buying. Even if I pay 80% of FMV I’d still be saving big bucks over what I’d pay for retail. I just hope other people aren’t trying for the same thing, as if they are it will probably go well over 80%.

I just wish I could reach the owner of the place. On the other hand, if I cannot find him, others probably can’t either.

You do realize that the 1st probably has a due on sale clause in it. If so they can call it due because the house was sold. How do you know the 1st is current. The Texas property code addresses how you handle a foreclosed property with a tenant in there. If they did not notify the tenant then he may become a tenant at sufferance.

Are you sure the second wasn’t done to avoid escrow and therefore could be back taxes. Have you checked for IRS liens against the owner.

The due on sale clause will not be a problem no matter what. Even if they call it I am preapproved for a loan greater than the first.

I know the first is current because I have a title report on the property. I suppose they could be a bit late in the payments but there is no NOD out on the place as of today.

As for back taxes, there are state liens on the place but it is my understanding they will be wiped out when the second goes to TS. I’m not in Texas, so the sufferance issue probably isn’t a problem.

Woudn’t IRS liens show up on a title search in the county the property is in? If not how do I check for them? Wouldn’t they too be wiped out in a foreclosure sale?

The IRS liens typically will not show up against the property but against the person. Do a ten year name search on the owners.

It does not seem normal for governmental liens to be wiped out in a foreclosure action.

You might want to find someone in your state that is experienced with foreclosures to discuss various issues with them.

Of course the owner always has the right to file a bankruptcy at the last minute and beyond.