Purchased SECOND mortgage at an auction! - Posted by Bill T.

Posted by IB (NJ) on November 24, 2006 at 12:42:09:

There used to be an investor on here, Ron Starr, who constantly advised against new Investors buying at sheriff sales for this very same reason.

Even without the $34k, this deal was pretty tight (78% LTV vs. the now 90%). Most of the experienced buyers I see at the sheriff sales don’t go into the deal for more than 70% LTV.

Good luck and please keep us posted.

Ib

Purchased SECOND mortgage at an auction! - Posted by Bill T.

Posted by Bill T. on November 24, 2006 at 04:19:37:

Here is the shortened and condensed version of what happened. I purchased a SECOND mortage at an auction for 251K thinking it was a first! Bottom line is that the loan that is in first is for 34k and was originally a second mortgage. This loan jumped into first position because the title company missed it’s presence when this home was refinanced! The homeowners defaulted on the loan and the lender that is owed the 251k foreclosed and sold it to me at the auction. Anyway, I have a 34k balance and lien on the property now that I may be on the hook for. Is there any way around this? Will the bank take a reduced amount as a payoff? ANY feedback is appreciated.

Re: Purchased SECOND mortgage at an auction! - Posted by Joe Kaiser

Posted by Joe Kaiser on November 25, 2006 at 10:49:56:

You didn’t purchase a mortgage, first or second . . . you purchased the
property when the second foreclosed.

If the attorney representing the lender thinks it was a second all along,
don’t ask for a pay off, ask for a discount. I’d send a satisfaction of
mortgage document and a $500 certified check and ask them to please
expedite.

Joe

Re: Purchased SECOND mortgage at an auction! - Posted by JT-IN

Posted by JT-IN on November 24, 2006 at 16:07:03:

Bill T…

First off, you state that you bought the Mtg at an auction… What kind of auction was this…? You are not talking about a sheriff sale, I presume…?

What kind of paperwork did you have as to the purchase of this mtg…? What kind of representation was there about this mtg… Did they say what position it was in…? Any representations at all… or was it strictly a “Buyer Beware”, travel at your own risk, situation…?

Were there other bidders for this mtg, at the time of the auction…? How did you arrive at a purchase price of 252K for a 251K mtg…? Instruments like this should sell at a discount, not at a premium.

What state is the property located…?

Is this Bill Taylor from Ind…?

JT-IN

Re: Purchased SECOND mortgage at an auction! - Posted by Dons

Posted by Dons on November 24, 2006 at 11:49:17:

Hi Bill,

Sorry I can’t help you out, however for others reading this…always buy title insurance (an owners policy).

Lenders will require a lenders title insurance policy, but that will not protect you.

My wife is a RE attorney who runs a commercial title company owned by her law firm. She has horror stories about situations just like the one Bill finds himself in.

This is why we always get an owner’s title insurance policy with every property we purchase.

Re: Purchased SECOND mortgage at an auction! - Posted by IB (NJ)

Posted by IB (NJ) on November 24, 2006 at 10:16:59:

First of all, what are the numbers involving the property: FMV, Repair costs, ARV?

If the property has plenty of equity you may be in a good position. You now own the property subject to the 1st mortgage and are responsible for keeping it (the 1st mtg.) current. Depending on your state laws, you may have the right to legally remove the occupants of the house.

So what do the numbers look like?

Ib

Re: Purchased SECOND mortgage at an auction! - Posted by David Krulac

Posted by David Krulac on November 24, 2006 at 07:27:03:

  1. It doesn’t cost anything to ask for a discount to the loan. The worst that can happen is they say no.

  2. You are not in a great negotiating position. Making the mistake and buying the second could have been fatal, like if the first was for $340K.

  3. Fortunately for you the first is small and you may end up eating it and having to pay it off in full.

  4. It you plan to sell the property sooner rather than later perhaps you can negotiate leaving the loan in place until you settle, sort of a subject to.

  5. How in the heck did this happen, obviously you did not do a title search before spending $251,000, that was penny wise, pound foolish. A title search might have cost you $100, now you could easily spend $34,000. Good luck.

Re: Purchased SECOND mortgage at an auction! - Posted by Bill T.

Posted by Bill T. on November 24, 2006 at 11:28:01:

The property is worth around 320-325k. Surprisingly, it only needs about 5k in work. I paid $252k plus 34k second and I’m at 286k for my purchase price. If the lien holder cuts me a break then I’ll be in better shape. The so called first mortgage went into a lis pendins in October so I’m in the process of obtaining a payoff. I’m hoping they’ll discount it because they think that it’s a second mortgage according to the attorney representing the bank. I’m hoping.

Re: Purchased SECOND mortgage at an auction! - Posted by Bill T.

Posted by Bill T. on November 24, 2006 at 10:06:36:

I feel crappy enough as it is! I actually called my buddy at the title company and he used his system to get info on the property. He didn’t find anything o it either. This one was so screwed up that even the title company missed the second lien when the mortgage was refinanced! You’re right though, THANK GOD the other mortgage was small! I’m waiting for a payoff.