here in NJ, tax lien foreclosure is done through strict foreclosure and I have seen it done, albeit rarely, for mortgage foreclosure. The court will set a deadline for redemption and as long as all parties have been joined, served and given a legitimate opportunity to redeem, there will be no sheriff’s sale.
You are absolutely right though, avoiding sheriff’s sale makes all the difference in the world when there is alot of equity involved. Ask your real estate attorney about strict foreclosure in your state.
I know I can ask my real estate attorney tomorrow, but I thought maybe someone here would know …
I am in Florida, a mortgage state. If someone buys a first mortgage note, and proceeds to foreclose, can it be done WITHOUT taking the property through the foreclosure auction? The reason: there is a lot of equity in the property, and I’d rather own the property than get the piddly fees that are allowed at the auction to the first mortgage holder if someone else bids more on it (which is almost a guarantee).
I think you need to either buy preforclosure from the owners, paying them something for their equity, although probably considerably less than full value. Or else, if you have the mortgage, as seems from your wording, you try to get them to give you a deed in lieu of foreclosure. Again, perhaps paying them some considerable sum for their equity, but not full face value.
Otherwise, plan to bid at the auction up to the amount you are willing to pay for the property.
As part of the premise and nature of a foreclosure sale, it is almost imperative in order for the owners property rights to be extinguished, this process must be public. Otherwise the owner can claim some form of collution or inside sale to extinguish their rights, which is essentially what you are suggesting here. This is very doubtful to have a remedy in the law that would allow a lender or any creditor to conduct such a practice privately, and not give the owner, or his agent a right to profit, if only from competitive market bidding at a public auction.
When speaking of overdue taxes, this may become another isssue. Since the lien for taxes owed is a first lien, and the taxing agency is almost above all reproach, they can pursue collection in and absolute manner. Of course, my own opinion is that the property tax collection area should be no different than a mtg lien, but they didn’t ask for my opinion when establishing their protocol on collecting overdue property taxes.
If you find something out to the contrary, I would be interested in knowing the details…
Maybe you can also buy any 2nd mortgages/liens on the property and get some of your equity back on those at the sale. Or maybe you can bribe the homeowner to give you a deed in lieu of foreclosure for say $500 or $1000.