Posted by Tom Brown on November 24, 1998 at 14:02:45:
Since John deeded his interest to Cuz, it would seem that he is out of the picture.
I am making as assumption that John and Cuz each had 1/2 interest in the property. Since this was a private deal, the 2nd lender may only be entitled to John’s original 1/2 interest. Which would leave Cuz and the 2nd lender (or whomever emerged from the foreclosure sale) as co-owners with 1/2 interest each. This would all depend on the terms of the deal. John never had the right to pledge more than his 1/2 interest as collateral.
And there is still that 1st lien out there waiting.
Posted by John C (CA) on November 24, 1998 at 12:02:04:
There’s a property going to sale tomorrow being foreclosed on by a second deed. The second loan was issued to “John Smith” and recorded against “1 Z street”. John Smith was co-owner with his relitive when the loan was made… since then he deeded his share of “Z Street” to his co-owner/relitive.
If one was to buy the foreclosing second deed at the sale would there be any question to clear title, since the loan was to John Smith who now (has no claim to the property)or----- does he still have claim??
A little confusing I know. I haven’t been able to get a clear answer form anyone yet… including a few real estate attorneys.
Botom line— would one own the title free and clear if purchased at the sale??
Can anyone shed some light on this issue?
Posted by Joe Kaiser on November 24, 1998 at 15:44:48:
I luv this sort of stuff because there’s sometimes a payday at the end of the line if you’re smart enough to figure it all out.
A little off the subject, but I’m in a community property state where one spouse cannot encumber their property without approval of the other spouse. Not sure if this or something similar applies to your situation (where it takes both owner’s approval to legally encumber their property). The loan itself may not be worth the paper it’s written on.
Additioanlly, when John deeded his interest to his cousin, I suspect the cousin received John’s full interest which likely includes the loan John signed for.
Whatever the case, the successful bidder receives only the interest the second mortgage holder’s position secured, and that may be everything or nothing, all subject to the first.
The way I read the post is that John Smith and Cuz Smith were on the deed as co-owners. Cuz also signed a mortgage/DOT to John Smith. Later John Smith deeded his portion of ownership to Cuz while retaining the mortgage.
The foreclosure would give John Smith a trustee’s deed but would not have any effect on the 1st lien. That money is still owned and they will foreclose if not fed regularly.
It also sounds like a lawsuit or bankruptcy by Cuz waiting to happen.
Posted by John C. (CA) on November 24, 1998 at 12:39:33:
John & Cuz are on the 1st DOT. Then ‘only’ John took out a second from a private lender/friend and never made a payment. John then deeded his share of the Property to Cuz and now the private lender is foreclosing on Cuz. Does John have any claim to the property after the foreclosure sale tomorrow?
As Tom said John is out in the cold and loses his interest in the property. Cuz still has right of possession and his interest as long as he did not sign the 2nd DOT. The 2nd would then have to file to partition the property if he can’t make a deal with Cuz.
As I said: It also sounds like a lawsuit or bankruptcy by Cuz waiting to happen.