The rules probably vary state to state so check yours, but here in GA, if the first opens the bid and no one bids higher, the first gets clear title to the property and all junior liens are wiped out. If you bid higher and are successful, you get the property and all junior liens are gone.
Every dollar that is bid above the opening bid goes to the second mortgage holder up to the point the second is redeemed. Above that, if no other liens exist, every extra dollar goes to the borrower.
So, you can see there is great chance the second will be wiped out, especially if the first is a relatively high LTV. That is why you have a good chance of getting a discount on an assignment.
Spoke with a woman this weekend who’s going thru divorce and her house goes to the auction block on June 28th.
I determined by talking with her that she is not very motivated and could care less if the house goes to foreclosure. She wants $6,000 above and beyond all debts and if she doesn’t get this, she’s just going to let it go. Go figure.
Here are the numbers on the deal:
1st - $72,000 Principal Mgt. Company
2nd - $14,500 BB&T
Comps - $100,000 to $105,000
Is there a way to do this deal before the foreclosure without dealing with this woman? I thought about calling BB&T and see about getting a discount on the second. Then calling Principal Mortgage to see if they would work something out with me.
I really don’t know if anything can be worked out since this woman owns the property until foreclosure takes place. Her $6,000 walk fee just seems ridiculous to me. I told her if it went to foreclosure she would get NOTHING. But she persistently tells me she will make no deal unless she gets $6,000. Any ideas guys?
here’s a couple of things… - Posted by steph in tex
Posted by steph in tex on June 19, 2000 at 17:40:17:
I would start by talking to this woman as if you might be able to work a deal. Get her authorization to speak with the atty and mortgage co. I would request a cure or re-instatement amount, and ASK FOR A 60 day EXTENSION from the 1st lien hold. Then I would go to work on the 2nd… yada yada.
But the first thing I always do is get the extension. They usually will only go 30 days, but i have been lucky once. It’s worth asking. Once you have a little breathing room, you can work miracles.
hope this helps
What is the condition of the property? If it needs any work, it makes the deal tighter and its already tight. Let’s see, total debt $86,500. What is the arrearage? That will make the deal even tighter. Plus, she wants $6k? Also, are there any liens or judgements on the property? The answers to these questions are critical.
Assuming you like the answers, maybe you could offer her some cash when and if you can get a big discount on the second. In general, I don’t mind paying 90%-95% of value if I can take over existing financing and keep my cash investment low.
Oh yes, property is in excellent condition. NO WORK is needed at all. No liens or judgements on the property. In fact I would not have even posted this question if property needed work, and there were liens, and I DIDN’T think I could talk BB&T into discounting 2nd.
I’ve included the “arrearage” into the $72,000.
One more question is, if I call BB&T and get them to discount the 2nd, how quickly can this happen and how quickly will their lien be removed against the house?
I’m just wondering what is the best way to appraoch this deal, if indeed it is a deal.
It can happen quickly if you talk to the right people. You want an assignment of the second, not a pay off. You become the second mortgage holder which is much better than getting the lien removed. That way, you can bring the first current and foreclose on the second if you can’t work something out with the seller. You will have a much stronger position. In fact, you may want to go for the assignment instead of dealing with the seller.
I had a house that was in pre-forclosure (no auction date, just letters from atty.) When I tried to bring it current they would not accept it. They called the entire loan due or they would foreclose.
Is there anything that requires a lender to accept all back payments, interest and penalties to stop a foreclosure? Does it matter who pays them? Does it matter if it is a homestead or investment?
How do you get an assignment? Do you pay BB&T a certain amount for the assigment? If the 2nd is $14,500, can I offer them $6,000 and get them to assign it to me?
There are never any guarantees but I’ve found that first mortgage holders will let junior lienholders bring the first current so they can protect their position.
Its a different story if you are trying to buy it from the seller. Often lenders will allow a borrower to bring the loan current but they will not let a buyer. In that case, I ask the borrower to contact the lender to get an amount to reinstate the loan. After I get a deed, I take a check to the attorney to stop the foreclosure.
Yea, that’s the idea. Be sure to point out to the second mortgage holder that the seller is willing to let it go to foreclosure and they would then be totally wiped out. I would go for a bigger discount for cash right away.
One more question. How does the 2nd get wiped out?
This is how I thought foreclosure worked, correct me if I’m wrong…
Let’s say it went to the auction block and the the 1st mortgage bank bought it for what they owed, $72,000. I assume that this sell does not wipe out the 2nd, because if I was the one who bought it at the sell for $72,000 I know I would still be responsible for the 2nd. Well, before the bank re-sells the property don’t they have to pay off the 2nd to get a clean title? So they would pay the 2nd of $14,500 and then sell the property for the $72,000 plus the $14,500 or $86,500.
I guess I’m confused as to where exactly the 2nd mortgage gets wiped out in the foreclosure process??