Re: Open bidding on 1st… - Posted by Natalie-VA
Posted by Natalie-VA on July 15, 2007 at 10:47:36:
It seems like almost anything can happen in these situations. My point is to warn the poster that buying at auction is risky and to be careful.
I’ve seen many instances where the 2nd survives the auction of the 1st (at least for a little while). It probably shouldn’t by law, but seems to happen in practice.
A lot of times, if it’s 2 different lenders, there will be 2 different attorneys conducting the trustee sales. Each attorney only cares about his client getting paid. I would think that the 2nd would legally be gone, but someone would have to make an issue of it. Here’s an example:
Last year, one came up that had a first and a second. There were two different lenders and two different attorneys (trustees). The first went to sale, and the bidding went high enough to pay off both the first and the second and around 100k for the former owner. Well, you usually have around 15 days to settle here. Most investors (not me) take the whole 15 days to do it.
A week later, the second went to sale. I was the winning bidder at this auction. I knew that most likely the winner from the first auction wouldn’t close for another 7 days, so I settled and recorded within 2 days. The proceeds from the sale paid off the first. Everything went okay and no one objected, but I think a number of things could have happened.
The lender for the 1st might have refused a payoff saying that they already had someone getting ready to settle.
The buyer at the first could have objected and said that the first sale extinguished the second.
I’m sure other scenarios could have come up also. The bottom line was the the foreclosure attorney who conducted the sale of the second (where I won) didn’t care about anything but getting his client paid. Since the first sale hadn’t settled yet and paid off his client, he was going to move forward.
The whole thing makes you wonder at what point is the forclosure official? It should be official at the auction, but all of the money (and deed) haven’t changed hands yet. I’ve had other situations where I won at auction and then the attorneys received payoffs AFTER the auction but before I settled. In most of these cases, they will rescind the sale to avoid litigation, but I don’t think they really have to.
I could go on about auction stuff all day. Very risky and lots of fun!