Hello Everyone,
This may be a silly question, but I am a newbie and I am still learning…so your help is greatly appreciated!
I have come across a nice home that is in foreclosure in California
due to its 2nd mortgage being very behind and will be going to auction in the next couple weeks. What happens to the 1st mortgage?
Also, how many days before the auction do I have still to negotiate with the owner and get the house from them directly?
Thanks in advance!
I had a property go to auction after the second refused to negotiate. Their BPO said the property was worth 350K where there was 65K on the first and 245K on the second.
They really really really thought that it was going to sell to an investor. Nobody bid. Their title insurance paid off the first trust deed (a HELOC that the buyer reopened fraudently after the second funded) and now they own a trashed POS that will cost them 60K… if they are lucky… and will only sell for, right now, about 285K.
If the second forecloses they can only list the house for what THEY are owed and must pay off the first.
We got a auction postponed the day of the auction, but we had been talking to the lendor for about three weeks.
When the trustee’s sale on the 2nd is held the property will be purchased subject to the existing first deed of trust.
The only constraint on time frame for negotiating with the owner is the trustee’s sale itself. Just be aware of the sale date if you do come to terms. The foreclosing lender may or may not be willing to postpone the sale.
Also a factor - depending on your circumstance you may be able to slam dunk a deal in a couple of days (plenty of cash, expertise to do the transaction without title company) or it may take you a month (financing, title).
Thanks guys for the replies!
So if the house is on auction because of the 2nd being in default,
I am assuming that the bidding will only be for the 2nd. If this is the case, would I have to pay the 2nd only at the auction or the the 1st AND 2nd combined at the auction?
Thanks!
The bidding would be on the second DOT only. In order to bid you need cashier’s checks for the full amount of your bid. Bidding would normally start at the total amount owed on the second (UPB, accrued interest, late charges, foreclosure fees, etc.).
After successfully purchasing the property at trustee’s sale you would have to contact the holder of the 1st, prove that you are now the new owner via the foreclosure sale and request reinstatement figures. They may or may not allow you to make monthly payments after that.
I find the last advisors info a bit confusing. However, maybe someone can correct me if my post is incorrect…If the second is foreclosing they have to let the first know. Upon sale whether it’s the first or second whose foreclosing they have to get enough to cover both notes. As far as I know a 2nd can’t control and wipe out first because their forclosing. …
However depending on who the lender is you may want to see if you can get a note sale done instead. Cause my understanding is you can only reinstate 1st and take control if your actually the 2nd lien holder whose attempting to foreclose…Then you would make arreages to bring 1st up and out of deliquency…Make repairs…Make pymts to first while rehabbing/or on market…then sell…Unless you actually get enough at foreclosure sale to pay for the discouonted note you bought…If that lender sells or not…That $65,000 lien they may settle at like 30% of value or less if they SELL…Then in that case you create equity…65,000 2nd bought for $19,500…creating $45,000 in equity for purchasing discounted note… If sold at sale…Ie: Just because you purchase note at discount doesn’t mean you discount the debtor…then if no one bids high enough without rehab and you take possession at sale and subordinate with first…You took possession as 2nd lien holder…Then you can resell and get equity above and beyond the notes you stated is there… However, if you get note at discounted price and someone bids high enough to cover both notes you just picked up possibly $45,000 in payment to you…Also you don’t need anything to do with the homeowners…Just the bank that owns the note…
“If the second is foreclosing they have to let the first know.”
Incorrect - In California anyway. A junior lienholder has no obligation to notify superior lienholders of a foreclosure action. The opening bid will represent the total owing on the foreclosing lien only - not a total of all liens. And upon completion the successful bidder will own the property subject to any superior liens - a junior lien does not wipe off senior liens.