I have an offer on a house, but have found out a few things when title was searched:
Sellers have a first and second mortgage totaling about $165K, both have lis pendens filed.
Sellers have four judgments against them, with liens on the house, for remodeling work done several years ago - about $75K.
They have filed BK, first mortgage has been granted relief from automatic stay and foreclosure is proceeding.
They have appealed the liens to the court of appeals in WI claiming the liens were invalid - looks like they have no case (representing themselves…)
At this point, there is no way this deal is closing - my offer is at $219K. Here is the question - how good are my chances of negotiating a short sale when the foreclosure hearing is coming up on Apr 1? They can’t stall this with a BK filing - they already tried that. We have four lien holders to negotiate with to reach a settlement…
At this point I’m assuming the first will foreclose at the Apr 1 hearing. Redemption period in WI is 6 months after foreclosure is granted - what are the chances a short sale can be completed in that time? My thought - should I kill my offer and just wait until sheriff’s sale, because that looks like where it’s headed right now.
Any thoughts or strategy would be greatly appreciated!
I would recommend pursuing a short sale immediately. The problem is that with large lenders, the office that handles the short sale process is not necessarily the office that is handling the foreclosure. You need to have the short sale put the foreclosure on hold.
The success of the short sale will be affected by the strength of your offer. You need to present the offer with a pre-approval letter from your lender. This shows that you have already been approved for the loan and there will be no delay on your part.
Short sales are notoriously long and drawn out - especially if there are numerous liens on the property. You may want to be prepared to show up at the sheriff sale. Buyer beware: All liens that were placed on the property before the first mortgage will tag along with the sale and the buyer will be held liable for them.
First lien holder is WI Dept of Veterans Affairs. I wanted to open negotiations with them directly, but seem to have little interest in negotiating anything, which is not surprising considering they are only owed $110K or so - still haven’t seen any payoff statements yet…
I have verified through title co that there are no other liens on the property before the first, with the possible exception of 2012 property taxes.
How common is a short sale after foreclosure judgement and redemption period begins? Am I better off taking my chances that another buyer won’t jump on a short sale considering the foreclosure hearing is so close? I’d love to pick this up for almost half my original offer if this goes to sheriff’s sale. Not sure I’m interested in holding up the foreclosure at this point.
Once the property goes to foreclosure, there is no short sale. That window has closed.
A buyer would first need to make sure that the original owner has no intent to redeem. If not, then the owner can sell you the home. The payment (by the owner in behalf of the buyer) is made at the county level and must cover at least the auction amount, plus auction fees, county costs and all the daily accruing interest (which is high so buy early). Anything over the redemption amount goes to the original property owner.
You wrote “I have verified through title co that there are no other liens on the property before the first, with the possible exception of 2012 property taxes.”
The issue here is not the liens that are before the first mortgage but rather those that are after the mortgage. The auction sale will erase all liens made before the one under foreclosure. All liens after that date ride with the property and are reinstated upon redemption.
This is exactly backwards: “The issue here is not the liens that are before the first mortgage but rather those that are after the mortgage. The auction sale will erase all liens made before the one under foreclosure. All liens after that date ride with the property and are reinstated upon redemption.”
Foreclosure wipes the leins from title according to the chain of title. If the foreclosing lein is a First TD it will wipe everything JUNIOR to if from title.
If the foreclosing lein is a 2nd TD it will wipe everything JUNIOR to it…the First TD and any or all liens that are ahead of the 2nd TD will remain of title.
In all cases the IRS wil have an automatice 120 right of refusal and WILL NOT be wiped from title until their right of redemption expires or is released.