Too much owed on house at Auction-Now what? - Posted by Brian, WI

Posted by lucky on February 22, 2002 at 12:34:11:

Dave
Thank you for the INFO.
I tried to e-mail you but forgot to take out the no spam. LOL

Thanks Again

LUCKY IN KY

Too much owed on house at Auction-Now what? - Posted by Brian, WI

Posted by Brian, WI on February 21, 2002 at 14:30:23:

Hi,

I was thinking about buying a house that is at the sheriffs auction March 4, 2002. From the research I’ve done so far, the back taxes owed are around $9000 and from research at the county court house today, found in all the paperwork about $142,000 being owed on the property on various mortgages I believe.

I’ve also called the attorney for the bank that is foreclosing to see what their opening bid will be, but they will not know until next week sometime.

Anyway, this house would probably sell for about $114,000 to $125,000 on the open market. Since about $151,000 appears to be owed on taxes, mortgage(s), what happens in a situation like this? Is there any possibility for this property?

Thanks

Brian, WI

Re: Too much owed on house at Auction-Now what? - Posted by lucky

Posted by lucky on February 21, 2002 at 15:15:41:

Brian WI
In MY state KY thier is no set opening bid,And the attorney handling the bid for the bank or mortgage co. is not suppose to tell what they will bid for the property.but after many years of buying at auction I’ve gotten to know some attorneys who will tell me what the bank needs. Also taxes are paid up to that day ,all leins are wiped out,except for federal tax leins(IRS) TO answer your question is there any possibility for this property?
I say yes because, What if the bank has to many REO"S on the books? They will let it go to the highest bidder
I had this happen once, the bank needed 56k their starting bid was 28k and I bid $$28,100 and I won the bid.I guess the bank had to many on the books or thats what I heard. So I say get prepared go to the auction and see what happens ,If nothing else it will be a great learning experience.

Best of luck to you

LUCKY IN KY.

Re: Too much owed on house at Auction-Now what? - Posted by David Krulac

Posted by David Krulac on February 21, 2002 at 14:35:36:

different states have different rules but if the first is $100,000 and nobody bids more than $100,000, then the junior mortgages are wiped out, the back taxes stay in place and the bank that foreclosed on the first is now the new owner.

David Krulac

taxes paid? - Posted by ken in sc

Posted by ken in sc on February 21, 2002 at 16:48:34:

In the foreclosure sales that I attend, the taxes are not paid, thus you as the buyer can get stuck with a couple years worth and penalties. Every state must be different.

You are right, though. You never knows what a bank will take unless you bid. I even had one where I was the “winning bidder” at $55,000 and then the lawyer called me later that day and tried to buy it back because he had mistakenly stopped bidding too soon! His loss was my gain.

Ken

Re: Too much owed on house at Auction-Now what? - Posted by Brian, WI

Posted by Brian, WI on February 21, 2002 at 15:47:23:

Lucky,

Thank you so much for the useful information, I appreciate it!

What do you think my next step should be? Again the auction is March 4th:

Should I contact the home owner for any reason?

Should I have a complete title search done and if so, how will this help me?

Should I have some type of Prelim. title search done if this is possible?

How do I know if all other liens will be wiped out?

How do I find out if there is a Fed. lien(IRS)?

Sorry for so many questions, but I like this house and think I can turn around and sell it quick without putting much work(repairs, updating, etc.) into the property itself. I could buy it out-right on the open market(CASH) if it was selling for the est. market value of about $115,000. So since I have the money should I be taking the risk or wait until I learn more about foreclosers and/or buying at sheriff’s auctions, which I hope to do upon attending my first convention in Atlanta next month?

Thanks again

Brian, WI

Re: Too much owed on house at Auction-Now what? - Posted by Brian, WI

Posted by Brian, WI on February 21, 2002 at 17:03:25:

Dave,

How do I find out the rules in my state, Wisconsin?

I’d really hate to be the high bidder, even if it was lets say $40,000 on a $110,000 property. I know I still have to pay the $9000 in back taxes, so $49,000 on a $110,000 property still is good, I just wouldn’t want to have to pay other liens, etc.

Thanks again

Brian, WI

taxes not paid in some states… - Posted by David Krulac

Posted by David Krulac on February 21, 2002 at 16:55:28:

the real estate taxes are not wiped out by the mortgage foreclosure.

Re: Too much owed on house at Auction - Posted by JT-IN

Posted by JT-IN on February 22, 2002 at 08:43:14:

Brian:

“Too much owed… now what?”

Sometimes, this can be a blessing in disguise, when there are multiple mortgages, or liens. Many times the Jr. liens will not bid or protect their position, leaving some unprotected equity for an investor to capitalize on.

Concerning the Title Search… yes, you should do a preliminary search, and based upon what you find, you may want to have it evaluated by a professional, dictated by your level of competence in searches, etc.

Be certain that all the liens of record have been “served”; (notified). If you find any lien that pre-dates the lawsuit, that has not served, this is a big issue. Providing all liens of record have been served, then they will be wiped out by the Sheriff Sale and issue of new deed to purchaser, whether you or the Plaintiff. In the case of the US of America, as a defendent, this would indicate a tax lien provided that they were served. The USA has no better standing than any other lien holder, and will only be paid in the priority of the recordation of their lien… except that they have a “right of recission” for up to 120 days. What this means is, say you bought it for 50K, (not likely) and the house is worth 110K, then for 120 days following the sale, the Gov’t could buy the property back from you for 50K, plus 6% interest… They maintain the right to recind the sale. This rarely happens at all, and not usually when there is less than 25K owed in taxes. This is usually a non-issue, as I have seen them with 100’s of thousands of taxes owed, and an equity rich property sale, and the Gov’t does not recind.

As for Wisconsin foreclosure law, it is a mortgage state, with judicial proceedings, which means there is a lawsuit, then a judgement, then a sale of assets. All of the above means, that as long as ALL the liens of record are served, you should be OK.

Whether or not the 1st mtg lender will bid the full amount of their loan and expenses is often times dictated by whether the loan is insured by FHA, VA or has PMI insurance in place. These will normally be bid to the full exposure of the lender.

Just the way that I view things…

JT-IN

Re: Too much owed on house at Auction-Now what? - Posted by LUCKY

Posted by LUCKY on February 21, 2002 at 22:16:02:

Brian,WI

I would do as dave suggest,learn what your state,city or town does before you do anything.the auction is march 4 th,you may not have enought time, but I would go anyway see how it all works and ask questions, spend time at the court house,LEARN, LEARN, LEARN.

Now I will tell you a story about My first time at the auction (I thought I knew it all,way back then) LOL
I was the successful bidder on a property the address was 1044 grand ave.I thought I did all my homework I went through all the files,checked out the property,
(I Thought)Won the bid at 3k boy was I excited I thought I just bought a 60k house for 3k (WRONG)
After the auction someone ask Me what I was going to do with IT,I said I was going to sell the house and he said what house?,You bought the vacant Lot next door to the house,here this guy was the neighbor on the other side of the lot who had started the forcloser due to back taxes and wanted the extra lot.
I then found out thier was a typo in the forscloser notice the address was suppose to be 1044-A grand ave.
Guess who just bought a vacant LOT 50ft.x 250ft. straight up a hill.(ME) So I talked with the Master commissioner (who is now My realestate attorney ) LOL
I told him about the typo and he said he could hold another auction and resale the property.
I said No I will keep the LOT and let it be a lesson to ME,so I kept it.I named it HOMEWORK HILL LOL.
It taught Me a good lesson about doing my homework and it came in handy as collateral on a few deals, IE(I have a building lot free and clear .)I sold it a couple of years later for 7k.
Thats why I say you may need more time to LEARN,LEARN,LEARN.

JUST MY THOUGHTS…

LUCKY IN KY.

Re: Too much owed on house at Auction-Now what? - Posted by David Krulac

Posted by David Krulac on February 21, 2002 at 19:16:16:

call or better yet vist the office handling the sale, here its the sheriff’s office and ask bunches of questions.

The law library, online for most states is another good place to look for answers.

Re: taxes not paid in some states… - Posted by LUCKY

Posted by LUCKY on February 21, 2002 at 21:21:02:

David krulac
at the auctions I attend, the city and county taxes are the first things paid from the proceeds ,then the Master commissioner gets paid,then the first mortgage,then the second, then the third, Ect.
after the sale gets confirmed by the courts ,I get the deed and I am responsible for the taxes from that point on.
I’m in KY I really don’t know about other states.

hope this helps

LUCKY IN KY

Re: taxes not paid in some states… - Posted by David Krulac

Posted by David Krulac on February 22, 2002 at 08:41:38:

In Pa. the taxes are not paid nor wiped out if the lender buys in the property, which happens 90% of the time.

David Krulac