Buying a second lien in New Jersey at Sheriffs Sale
Hello,
I am looking to purchase a second lien at a sheriffs sale in New Jersey. I researched the records and the first lien has also filed a lis pendens. Original (first) lien was issued in 2003 for 30 years/set to mature in 2033 for $75 k. So knowing this, the $50 k second lien is appealing knowing that the first lien wont be that much and there is still about $100 k of equity in the property. I was just curious of a few things though and was hoping the BP community could help me out.
After bidding and winning on the second lien at the sheriffs sale, is it a simple process to get in touch with the first lien holder? I know right on the lis pendens doc there is contact info for the attorneys. But I wasnt sure if they were willing to talk to the public in general?
After I win the second lien do I technically have rights to the property at that point?
Are there any attorneys out there that will walk investors like me through the process so I can thoroughly understand the process? I understand I can run title on the property prior to going to sheriffs sale, which I plan on doing.
Thanks!
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@Benjamin Haberman If you are the successful bidder at the auction, yes….you own the property subject to the first mtg. (and any other liens that survive). You have a legal right, as a successor in title, the receive a pay off amount from the first, by law. Are they generally responsive on the first contact…no. You will have to follow up.
You also don't know the payoff on the first mortgage.. Just because it was a 30 year mortgage in 2003 for $75k don't mean it's almost paid off. in 2011 housing crash many banks took people that were 2-3 year behind in payments and added all those payments back to their principal and then started the 30 year clock over.. Check for any mortgage modifications that were recorded. Also the bank should take with you after the deed is recorded in your name.. They will not talk with you before that point as they can't discuss anything about the existing 1st mortgage due to fair credit laws. I'm not saying don't buy the 2nd just be careful and do you homework.
If the 2nd is a bank you could also contact them and see if they would sell you the 2nd at a discount and then you could just step in do a substitution of plantiff and continue the sheriff sale with yourself as the 2nd mortgage holder.
@Justin Summers thanks guys. There are no other docs filed with county clerk between the two mortgages and the lis pendens. So I don’t see any loan modifications. Do attorneys/title companies ever drop the ball and not record docs like that?
When did the first file a lis pendis? how long ago? Does your county have the docket online? Try to get a copy of the first mortgage foreclosure complaint.. Many times they will list how much they are owed in the foreclosure complaint.
@Justin Summers second filed lis pendens in January. First just filed in august. No mention of amount owed in file. However, both have a contact on the lis pendens for maintenance, security, and upkeep of the property.
Because second is filing first, does that protect their interest for when the first gets sold? Or not necessarily?
Filing of Lis Pendis date order doesn't matter it's about the filing date of the original lein/mortgage that determines pecking order. If the 1st foreclosures first (date of sherriff sale) it wipes out the 2nd. If they second foreclosures first it takes title to property subject to the first.
I would reach out to both the 1st and the 2nd and try to buy either one of them at a discount. Most of the time the first will sell at their face value (Value without interest and penalties) say it's $20k.. Then when you foreclosure you can add all those back into the judgment (Say another $3k) which is profit if someone else out bids you at the sherriff sale.
@Justin Summers i called sheriffs office. The first called in a notice of consideration and the amount of the first ($43k). So it will be interesting to find the amount announced tomorrow of the second. From what i understand, it won’t always be the judgement price that’s announced. Come to think of it, I’m going to call back and see if the judgement has changed on the second.
Good luck.. when is the sale?
@Justin Summers court house in cape may county. Are you from jersey?
I was asking when it is going.. I'm not.. I'm in PA
@Justin Summers oh sorry. It’s tomorrow. I called the sheriffs office. They post min bid between 10 and 11 am. So I’m tuned in, ready to go.
good luck.. Keep us updated. make sure you know the terms.. Usually you need a cashier's check for either a percentage of your bid or possiblity the entire amount of your bid and make sure you know who it is to be made payable to.. Sometimes it's yourself and other times it's the sheriff.
Quote from @Justin Summers:
good luck.. Keep us updated. make sure you know the terms.. Usually you need a cashier's check for either a percentage of your bid or possiblity the entire amount of your bid and make sure you know who it is to be made payable to.. Sometimes it's yourself and other times it's the sheriff.
Unless it's online.. then it's another story.
@Justin Summers is there anything wrong with reaching to the owner that’s losing their house in the sheriffs sale and offering them a premium to let me clear off debts and save their credit prior to sheriffs sale?
Also- update.
Upset on second was $36 k as advertised today on minimum bid on website.
First was announced at $43 k.
Second went for $95 k.
I was curious to know if the difference of final bid ($95 k) and upset ($36 k) would automatically clear up the first. But the lady that won it said no. Her $95 goes to second bank. And then another $43 to first bank.
I did not win. I bailed at $47 k because i didn’t know if the difference paid off the first lien. Anything (total cost ) over a $100 k wasn’t worth it to me. I wanted to sell it as is.
Not 100% sure but most of the time the bid would go to payoff the 2nd mortgage that is foreclosing and all their fees. Then any left over goes into an an escrow with the court and the 1st mortgage would have to apply to the sheriff to release it to them and then if anything is left over from that after the first is paid any other liens would be paid (If they applied for the overage)
So, a Bid on the 2nd today of $36k and having to pay off the first mortgage of $43k would be pretty much the same as bidding $79k at the auction today. You would have to follow up with the first and have them file a claim on the proceeds after the sale.
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@Benjamin Haberman @Justin Summers Not sure about NJ, but here…..any overage from the second would go to Junior liens since they get wiped out. Anything left after that, or if no junior liens, the overage goes to the Owner. The first mtg receives nothing since their lien is still in tact. Same thing happens here with HOA foreclosure auctions.
@Justin Summers i asked the person that won it this same question.
She won it at $95 but the upset was $36.
I asked if the difference would go towards the first lien (which was announced at the sale) which was $43.
What kind of attorney would i look for that would know this like the back of their hand. I’m hungry to learn this.
If they really did only pay around $95. It was a deal. I just didn’t thoroughly understand how it worked, so i bailed. To me it wasn’t worth $95 k + $43k (first)
Any jersey experts chime in on this? Does the overage of the sheriff sale of the 2nd mortgage go to pay off the 1st? or back to the owner? I'm not sure..
My understanding is 1st mortgage always gets paid first regardless of who is foreclosing between 1st or 2nd mortgage assuming 1st mortgage recorded first in the county records. In this example if 95K bidder wins the property; 43K gets first paid to 1st mortgage lender and remaining 52K goes to 2nd mortgage (so called Lien priority order).