Trustee Sale - 2nd mortgage lien.

Foreclosures, Short Sales, Tax Foreclosures
1

Is it true, when you buy a property at auction, if there is a lien from a 2nd morgage company (because the owner had a 1st & 2nd). You have just assumed that lien and now you are responsible to pay the debt?

Thank you.

2

Howdy Koconnor:

If you buy the property from the trustee and the 2nd lien holder is the lien holder that is the beneficiary of the sale then the 1st lien is still valid and you will have to deal with that lien holder. You have not assumed the loan but merely bought the property subject to the debt. It too may be in default and probably has a due on sale clause and the property has been sold. You should contact the lien holder before the sale to try to make arrangements to assume the loan and bring it current or get a payoff and pay the loan off shortly after the foreclosure sale.

You may be able just to cure the default and keep making the regular payments and actually do a subject to deal but this would be risky because of the foreclosure sale being public. They are supposed to be notified of the sale by the 2nd lien holder as well.

3

Here’s a better picture of the situation.

The mortgage company in 1st place…$250K…has filed for foreclosure.

But there is also a 2nd on the property for $50K. Which shows as a lien on the property.

So, does that mean whoever buys the property at auction will assume the $50K debt? Keep in mind the 1st & 2nd are with 2 different banks.

If so, will the person who buys it at auction, have to pay the $50K before they can take title?

Thanks.

4

Howdy Koconner:

A totally different question than before. If the 1st lien holder forecloses the 2nd lien holder is SOL and is wiped out. They still have a claim against the owner but can not file against the property that you just bought at the sale.

You will get a deed at the sale from the trustee and you will own the property free and clear of all liens that the owner borrowed. Keep in mind that other liens may be against the property that will remain against the property. These would be where someone may have sued them and got a judgment like a hospital, City or County or State or any individual. These are involuntary liens and remain until paid or released or time expires and they are not renewed.

5

Thank you Ted!!

Your reply was a big help :slight_smile:

Kelle.