A few years ago I was in the office, when the receptionist said a gentleman was on the phone and had a question about the house he bought at the auction that day, and asked if I would talk to him.
I picked up the phone and asked what I could help him with.

Finding Great Deals at Foreclosure Auctions

The man said he bought a house that day and wanted to know when he would be able to go into the house and start working on it. I verified which auction he bought it at (Foreclosure or Sheriff sale) and told him that as long as the house is not occupied, he can enter the house right away but, it would be a good idea to wait a few days. This was to make sure the previous owner didn’t file a last minute bankruptcy — the Trustee would inform him if that happened.

The man got excited and went on to tell me that he got a “sweet deal.” I asked him what the numbers were and he told me that he bought a house that was worth $450,000 for $67,000.

My eyes grew very wide and I quickly asked him if he had done research on the title before he bought it? His response was that it was his understanding that the auction wipes out all junior liens so he didn’t see why he needed to research the title.

I remember shaking my head in feeling sorry for him and said, “I’m sorry Sir. I’m pretty sure you just lost $67,000.”

Be Sure You Know What You’re Bidding on at Foreclosure Auctions!

The man shot back in a loud voice, “What!? How do you assume that with what I have told you?” I replied by saying, “You bought a property in what I am assuming is a nice part of town for fifteen cents on the dollar or 85% equity, right?” He said that was correct. I continued by saying, “Can I assume that you were the only person who bid on the property?”

He paused a few seconds and cautiously said, “Yeah. How did you know that?”

I answered by saying, “There are a lot of investors down at the Dallas auction that aggressively bid up to seventy five cents on the dollar all the time but, not a single one of them bid against you on a house that had a huge equity spread. The reason they all passed on it which allowed you to buy it uncontested is because it’s a second lien. You are now responsible for the first lien which is likely close to 80% of $450,000.”

There was a silence on the phone for several seconds until the man responded by simply saying, “S*%#.”

I told him to call the trustee right away and pray that the previous owner filed bankruptcy and if they didn’t beg the trustee for mercy, ask if he will refund your money and explain that you made the bid without knowing you would be responsible for the first lien.

He said he would call right away and said he wished he would have talked to me before he went to the auction.

The man called me the next day and unfortunately, he said the trustee said he was sorry but, he couldn’t deem the sale invalid at that point and suggested he call the 1st lien holder and find out if they will do a short sale.

The man told me that he couldn’t come up with the amount of money it would take to satisfy the first lien and his credit wasn’t strong enough to get a loan for it.

Surely, that was the most expensive mistake that he had ever made but, entirely avoidable.

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Tags: 2nd mortgage, foreclosure-auction, Foreclosures, lien, mortgage

I was talking to a friend who was looking at purchasing a piece of property. He was nervous because it was to be his first home and asked me about liens.

How Do I Find Out if there are Any Liens on a Property?

The answer is pretty straight forward. For the most part, liens are a matter of public record once recorded. To find if there are any liens, here are your options:

• Search the county recorder, clerk, or assessors office online. All you need is the name of the property owner, or it’s address. If your county does not have the data online, then:
• Visit the county recorder, clerk, or assessor’s office in person. Generally, you will find that these people will be quite helpful, and could give you pointers if you need any.
• Contact a title company. Title representatives can be extremely helpful in many ways . . . finding liens is one of them. I strongly advise having a good title rep as part of your investing team!

With that in mind, Title Insurance is there to protect you as the buyer from liens you did not expect such as last minute liens, or those that may not have been known or recorded. Like other insurance, they will write a check to deal with the liens if they are missed. If you want to protect yourself from any potential liens, you want to be sure to purchase an owner’s policy. It is an owner’s title policy, not a lender’s policy that protects the buyer of the property.

Keep in mind that you shouldn’t count on the word of the seller or even your real estate agent, as they may not necessarily know about all liens or possible defects in the title.

Tags: assessor, county-clerk, county-recorder, find-lien, insurance, lien, mortgage, property-lien, property-title, real-estate-lien, title-insurance, title-rep

What is a Foreclosure?

A foreclosure occurs when a property owner cannot make principal and/or interest payments on his/her loan, typically leading to the property being seized and sold.

How does a foreclosure occur?

The foreclosure process is not very difficult to understand. There are several stages during which the homeowner has an opportunity to bring the loan current and avoid foreclosure.

After about three to six months of missed payments, the lender orders a trustee to record a Notice of Default (NOD). At the County Recorder’s Office. This puts the borrower on notice that he or she is facing foreclosure and starts a reinstatement period that typically runs until five days before the home is auctioned off.

If the default isn’t corrected (the loan must be brought current) within three months, a foreclosure sale date is established. The homeowner will receive a Notice of Sale, and this notice will also be posted on the property. In addition, the Notice of Sale is recorded at the County Recorder’s Office in the county where the property is located. Finally, this Notice of Sale is also published in newspapers local to the county in question over a three-week period.

The foreclosure Trustee Sale typically occurs on the steps of the county courthouse in which the property is located. The time and location of this sale are designated in the Notice of Sale. At the Trustee Sale, the property is auctioned in public to the highest bidder, who must pay the high bid price in cash, typically with a deposit up front and the remainder within 24 hours. The winner of the auction will then receive the trustee’s deed to the property.

What Happens at the Foreclosure Auction?

At auction, an opening bid on the property is set by the foreclosing lender. This opening bid is usually equal to the outstanding loan balance, interest accrued, and any additional fees and attorney fees associated with the Trustee Sale. If there are no bids higher than the opening bid, the property will be purchased by the attorney conducting the sale, for the lender.

If this occurs, and the opening bid is not met, the property is deemed a REO or Real Estate Owned. This typically occurs because many of the properties up for sale at foreclosure auctions are worth less than the total amount owed to the bank or lender.

When you purchase property at a foreclosure sale, all junior liens other than property taxes are wiped out. Priority of liens is determined by the date of recording. When you purchase a REO aka. Bank REO, you will typically receive the property with a clean title.

Learn How to Avoid Foreclosure from HUD.

Discuss Foreclosures at our:

• General Foreclosure Talk Forum

• REO Forum

Find Foreclosed Properties:

• Bank REO Listings
• Pre-Foreclosures
• Government Foreclosures
• Asset Management REO

Tags: auction, bank, default, foreclosure, interest, lien, mortgage, NOD, noticeofsale, principal, REO, sale, trustee