I have a general question for anyone out there with experience at courthouse foreclosure auctions. I have cash to buy and I’m looking for a rehab flip project. All of the REO listings around here are priced to high to leave any profit for flipping. I’ve went to aauction at the courthouse to “watch” as everone recommends, but there were NO bids on any property. Every house on the list was sold to the plantiff who bid $100.
So my question is, will the attourney always bid up to the judgement amount? Would I be wasting my time trying to bid say $75,000 on a property with a judgement of $175,000?
Not ALWAYS, but almost ALWAYS the bank will bid to the upset price. Sometimes the bank just doesn’t show up. However, the main problems is that “most” of the foreclosures are upside down…they owe more than then property is worth. Rarely, the bank doesn’t show up to bid or lets the bid go below the upset price. The main problem is the notes aret often held by out of state entities that have no idea what the local market is worth. These entities have cookie cutter procedures that do not allow the bank representative at the auction to think.
I bid on the courthouse steps and NEVER bid on a property that is loaded with liens and judgments as you own them when you buy it or you wait for 20 years for them to drop off IF they do not renew them. (most don’t)
Bidding on the courthouse steps is a full time job. Doing your title searches, looking at the property and trying to get in if you can, determining the ARV, etc. You may go to 20 auctions, 19 of them canceled and 1 went back to the bank for the full value of the lien. But then that next one was an incredible deal. Put some effort into it and you WILL get some outstanding deals. You just have to be there for quite a few auctions before you get that deal.
I have a buddy who wholesales and goes to EVERY single courthouse steps auction and he buys at least a house a week. But that is all he does all week long. He also sells every one of these properties prior to having to pay the balance within the standard 15 days. Often before he walks off the courthouse steps.
Assuming that the foreclosing lender is in first position, any junior liens and judgment liens are usually wiped out by the foreclosure unless the auction generates enough revenue to pay off junior liens. Superior liens such as property tax liens, IRS liens, and some municipal utility liens do survive foreclosure. Following the foreclosure sale, the IRS has 120 days to redeem their lien, after which the lien is no longer in enforceable.
The winning buyer at the foreclosure auction may still have to deal with any property tax liens and municipal utility liens, but the cost to satisfy these liens should be relatively inexpensive compared to the purchase price of the property.
A judgment lien may be extinguished by the foreclosure, but the judgment itself is still active and enforceable against the judgment debtor.
Assuming that the foreclosing lender is in first position, any junior liens and judgment liens are usually wiped out by the foreclosure unless the auction generates enough revenue to pay off junior liens.
Rarely does the auction generate enough to pay junior liens as most these days do not have any equity. The key word here is “usually”. That is what scares me. Junior lien holders DO have the ability to “protect” their lien once they have received notice that the sale will take place.
If the lender bids $100 they take the property back into their portfolio of real estate owned. It’s been a few years since I lived in Florida, but can you not negotiate with the bank for a favorable deal? If you negotiate a purchase for less than the amount sold, the bank then obtains a deficiency judgment from their original borrower or writes off the deficiency. - Either way, you get the property for a reasonable price and the property is off the bank’s books. As to subsequent liens: unless it is an IRS tax lien, they will be lucky to see 10 cents on the dollar - particularly in a declining market.
OK, I talked to my lawyer to get to the bottom of this. She also owns a title company.
Here is the real deal and the answer to the “secret” that no one on the internet seems to know. I searched high and low before contacting the lawyer. And the information I am about to give to you is extremely valuable. It will let you bid on properties loaded with judgments in a care free manor as you will know exactly what you are doing.
Junior lien holders ability to “protect” their lien requires them purchasing the property. They will have to be the one on the court house steps that actually wins the bid. So they will likely have to pay a fair amount of money to secure their 2K lien. NOT Worth it. That is why they don’t do it.
All judgements or liens that the seller brought with them when they bought the house will be yours. So if they had a bunch of medical bills and THEN they bought the house, those liens take president and HAVE to be paid. All liens after the deed of trust get WIPED OUT. And you do not have to pay a single penny to those people.
The exception is leans that were created after the Deed of Trust and were state or town related. Their are conflicting views on the State or Town. Everyone agrees that the State and town taxes have to be paid. Some title companies will require that you pay off the cities weeds and trash violations as well and other title companies don’t pay them. Those that don’t are the ones that know what they are doing. The towns keep their mouths shut and accept the money from the other title companies because they know if they cause a stir, they will be exposed and all title companies will know that they don’t have to pay this.
The other exception is the IRS. They will have their lien wiped off as well at 120 days after the sale. BUT they do have the ability any time between to say I WANT THAT HOUSE to satisfy their lien. They then will have to cut you a check for what you paid for it. That is why if they have IRS liens, you don’t put ANY money into that house for 120 days. Wouldn’t that suck for you to dump in 50K in rehab and then they say I want it. You are then S**t out of luck on your 50K as they will not pay you for that. And I have also been told that it is a very rare occasion where the IRS will actually claim the house as theirs.
So, that’s the deal. Now you know and you can go and get RICH on the courthouse steps from the information that I gave you. The same info that I will probably get a bill for from my lawyer for. When everyone is scared to bid on a property and you buy it confidently, while they are thinking, what in the world is that Idiot doing, they just bought all of those liens, you say yes, I am an idiot investor and keep the top secret info to yourself.