Ok, in the local legal paper, in the “Upcoming Foreclosure” listings in the property description they tell you the mortgage amount being foreclosed upon, let’s just say it’s $100k.
Let’s say you purchase at auction for $100k. My question is, even if there is a 2nd mortgage taken out on the house, do you still only pay the $100k or will there be a “Suprise!, there’s a 2nd position and now you have to pay that off too.”?
Also, if there are back taxes to be made up, are those included in the opening bid from the mtg company?
Anything else hidden in there someone would be kind enough to shed some light on?
when you buy a property from the auction block all subsequent liens are wiped out… (except taxes) you also need to know in most states the auction block is a cashiers ck only. (meaning the bank is not waiting for your loan to be processed ) some states they allow for different payments.
You need to do your due diligence on the property. The notices almost never say which position the foreclosure is being done on. Most times it is the 1st position, but if you go to an auction, bid and win - and it’s not the 1st position, you will be responsible for that as well.
You will need funds up front for the auction as well. How much depends on which state. in NY, we need 10% of the winning bid in the form of a cashiers check at the close of auction. Some states require the entire amount at the close of auction.
Generally date of recording establishes priority of the lien. For instance if you have two mortgages on record the one that recorded earliest would be the first, the latter the second. Bear in mind when you do a title search you need to take into account reconveyances/releases, subordination agreements, etc. to get the full picture. And you DO need to have all this nailed down before you attend an auction.
Even though Grape already addressed Cali I feel the need to clarify…
It depends on which bank filed.
If the 1st TD files… and goes to auction… before the 2nd, 3rd, etc., the other loans are considered subordinate and are wiped. If the 2nd TD files… and goes to auction… then the winning bidder has to pay the 1st TD.
Note that multiple TDs may file. Had one where the 1stTD filed after the 2ndTD filed. Had the 2nd TD postponed (they didn’t) the 1st TD would still have gone to auction.
Furthermore certain liens… property tax, IRS, judgements, etc. still take precedence.
There are several things you should do before actually bidding.
Contact your local courthouse to see how much you must pay that day and in what form (usually cash or cashiers check.) Also see how long you have to complete final payment and in what form that payment must be made. Sometimes it can be as quick as the same day.
Find out what happens if you miss making payment in full.
Read the case file for the property kept at the courthouse. It will tell you quite a bit about the property and loans outstanding.
Learn if your region has a right of redemption and how that can affect your property purchase.
If you are really serious, consider doing a title search or hiring a title company to do a quick title search.
Be aware that not all liens are necessarily removed in a foreclosure hearing. For instance, you will probably still be liable for any unpaid back taxes, federal tax liens, etc. Generally a foreclosure only voids JUNIOR liens to the lien being foreclosed upon.
Your best resource for your area is to ask questions of the staff at the courthouse and to watch some auctions happen and talk to other investors there who are actively bidding.
“5) If you are really serious, consider doing a title search or hiring a title company to do a quick title search.”
Is it really economical to do a title search on every property you want to bid on? In a given week there might be 5 or 6 that could possibly be worth trying to purchase. At $50-$200 a pop, title searches could make you go broke in a hurry. Do you guys do title searches on every property you’re going to bid on?
I think what I need is someone in my area that would show me how to do a title search good enough for a foreclosure… I’d even pay them generously for their time.
No need for a title search, go ahead and lay down a couple of hundred grand, buy a property at auction and find out whats on title afterward, it’ll be more exciting that way!
Yes, you need to do a title search on any property you might bid on. Period. And yes, if you hire a title company for each one you will probably go broke unless you have significant funds at your disposal.
Learn to do the title search yourself, it is a must.