How can this be legal? - Posted by Z.H.

Posted by Z.H. on October 25, 2003 at 13:38:57:

Can’t this scenario cause a whole lot of complications for the buyer who buys at the first auction?

There is no redemption period in AZ.

Getting the cash would not be a major problem given the profit potential. It is the holding costs that I am more concerned about because it may take a while to sell a house in this price range.


How can this be legal? - Posted by Z.H.

Posted by Z.H. on October 23, 2003 at 18:24:04:

Here’s a strange situation that has me baffled.

Found 2 notices of trustee’s sale for the same property from two different lenders.

One has the auction sale scheduled for Dec 30th and the other one for Dec. 31st 2003.

There is also a Fed Tax Lien and an HOA lien. (total $15K combined)

The house is worth about $800K. Tax assessed at $650K.
First lender is trying to foreclose on the original $400K loan from 1998 when the house was first purchased. However this is not the original lender. They bought the note from the original lender a year after the purchase when the owner fell behind in payments and was facing a possible foreclosure. That foreclosure was cancelled after the note was bought by these guys, and now they are the ones trying to foreclose.

The second one is trying to foreclose on a $75K loan issued in 2000.

I always thought that if the first one forecloses, the other ones get wiped out.

So what am I missing? What could possibly be going on that something like this could happen?

Thanks in advance,

Additional thoughts - Posted by Tom-FL

Posted by Tom-FL on October 23, 2003 at 23:55:52:

In addition to the previous post, I’ve got this to add.

Don’t be surprised if the sale for the first mortgage gets cancelled.

Say I was a first and had started a foreclosure, and was looking at having a bad loan on my books and the possiblility of getting stuck with some turkey house that I had to pay taxes on and mow the lawn and look after for the better part of a year, and then pay a RE commission to get rid of it. Then I noticed the second had started a foreclosure proceeding to protect their interest, I’d drop my suit like a hot potato. After all, since I’m ahead of them, I’m guaranteed to get PAID IN FULL. I’d just let them take the hit and all the aggravation that goes with it.

Re: How can this be legal? - Posted by Tom-FL

Posted by Tom-FL on October 23, 2003 at 23:42:12:

Yep, you are correct. If the first forecloses, then the juniors get wiped out.

So, if the first is scheduled on the 30th and the second on the 31st, then the second gets wiped out at the sale on the 30th.

On the other hand, if the second is scheduled on the 30th, and the first on the 31st, then the second bids their position and takes the house subject to the first, provided no one bids higher.

What’s going on? Well the second got notified that the first was foreclosing and decided to act to protect their interest. They probably fast tracked their case somehow so they got a sale date ahead of the first’s sale date. Wouldn’t you?

Makes sense - Posted by Z.H.

Posted by Z.H. on October 24, 2003 at 11:29:30:

I guess this scenario makes sense. The first is scheduled on the 30th. The junior one is scheduled for the 31st.

I’ll stay away from this one for now, but I’ll keep my eye on it to see what happens. At the very least it will teach me something new…from a distance.


Another senario - Posted by JD

Posted by JD on October 25, 2003 at 11:54:38:

A very realistic senario which I have seen happen. Lender 2 decides to do a foreclosure, they get a title commitment which shows there is no pending foreclosure action from Lender 1. Lender 2’s attorney drags his/her feet, doens’t get the forclosure filed till after Lender 1. Lender 2 is now foreclosing and is oblivious to Lender 1’s foreclosure sale date which is one day ahead of Lender 2’s. possibly a good buying oppourtunity if you have the cash. But you didn’t say what State you are in, there may be a post sale redemption period.