2nd lien on property

6 Replies

When houses are in foreclosure and the asking price is 250k does that also represent any additional liens that may be on the property. If I were to offer 250k could the bank come back and say there's an additional note on the property that also has to be paid above the 250k?

Absolutely not. Always pull title. That is likely the foreclosing liens opening BID which is a reflection of what they are likely owed. The bank would not come back to you. You would either win the auction or not. You don't want to purchase into a lien position that is unfavorable or a property for that matter. I recommend newer investors stay away from foreclosure auctions.

Thanks Brett. It seemed strange to me that there were additional liens. Thanks for the advice!

When you do pull the title that would show any additional cost that could be associated with the property?

Let's say you go to a foreclosure auction and are the winning bidder on a property. You takeover the property subject to any liens not wiped out by the foreclosure process. A title report would help you to determine what those might be. For example, if the foreclosing lien was in second position you would minimally be subject to the first position lien. So perhaps there's an existing $100K senior lien and the foreclosing lien holder was in 2nd position for $50K. As the winning bidder you now own the property subject to the $100K lien. There may also be existing tax liens, HOA liens, IRS liens...this is why @Brett Goldsmith as well as many others advise newbies to stay away. If you don't know the ins and outs of a foreclosure auction you may end up not knowing the ramifications of your purchase.

Based on your original post it's unclear if this is necessarily the position you're in. You may be talking about an REO, a property that's already been through foreclosure and is now owned by the bank. At this point the property is not IN foreclosure it's FORECLOSED and the bank has put it on the market. If this is your situation then all other liens are cleared. If the bank were to accept your offer and you closed on the property, the title should be clear of any and all other liens.

@Odie Ayaga thanks for the information. I never realized that Foreclosure and Foreclosed had different meanings. I appreciate your input regarding these additional liens. For the time being I’ll keep a safe distance from the potential financial nightmare that could result in purchasing at auction and I will be sure to do a title search. Thanks. 

No problem and best of luck!

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