Question about foreclosure bidding

[Ed B.]

Does anyone know if an unsecured debt against a borrower becomes part of the total loan debt that needs to be satisfied during a foreclosure sale?  Example: Secured debt of $200,000. Unsecured debt of $50,000 which is also a general lien against the owner's assets.     Would a bidder at the foreclosure sale be required to include both debts in his bid amount?   Or only the secured debt? thanks

[Jay Hinrichs]

Quote from @Kevin Sobilo:

@Ed B, a few thoughts:

1. ALWAYS check technical questions like this out with a REAL ESTATE lawyer in the state you are operating in which looks like Oregon. I think the concepts are similar in most states but sometimes details may vary and be important. 

2. I think the only liens typically not wiped away by the action would be governmental liens like property taxes, IRS tax liens and maybe even municipal liens. 

3. I believe payment is generally made in TIME order. Most times that means the 1st mortgage (the usual foreclosing party) gets paid first and after that each lien is paid in the order it was recorded. That could include a judgement lien if any money is left. 

4. Just because a general lien (judgement lien) doesn't call out the specific property doesn't mean its unsecured. Once that judgement lien is recorded it attaches to the property in much the same way as a mortgage lien. If the property is sold, the judgment lien is still attached even though someone else owns it!

5. In my experience, the bidding instructions for the auction will include some GENERAL guidance about what is paid off with the sale price and what else might need to be paid. 

However, do not expect this to be a comprehensive explanation. These sales are not meant for newbies. If you are going to bid get with someone experienced to assist you and/or get with your real estate lawyer. 

6. Did I mention, get with your real estate lawyer?!? (sarcasm). Its important! Foreclosures, tax sales, etc are messy and if you are going to acquire properties in this way you are likely to need their services before and/or after the sale. 

For example, with tax sale properties its common to have to have your lawyer do a quiet title action and still have to wait a year until title insurance can be issued. A good real estate lawyer can do this work and guide you through the process. 

If this is an Oregon foreclosure that lien goes away. In OR WA CA the only lien that survives will be IRS and it will sunset 4 to 6 months after you buy it.. IRS has the right of redemption but they never do.. I was one of largest court house steps buyers in the PDX market for years having bought hundreds of these. 

In Oregon specific what you do need to check for is Senior property tax deferral there is a special number in Salem you need to call to see if there are any Senior deferrals other than that your taking title subject to back tax's  

And of course West coast sales are ALL cash at the sale with Cashiers checks. 

OH and HOA sometimes will try to hassle you to pay back HOA but technically they cannot

Kevin PS  I did one sale in PA and that was enough that is a very tough complicated state to do foreclosure and tax sales.. its a specialty no doubt and your correct unless you have years of experience in that state a Lawyer is a must on the front end. Out west NO need for lawyer its very straight forward.. Same with Tax sales they are final at the time of the sale ALL cash and there is no redemption period unless the entity or person who lost it can prove the county did not publish the sale for the correct amount of days.. Ask how I know that one it happened to me the sale becomes voidable some how the county only published 20 days not 21 and it was discovered at trial when the folks that lost it sued and they won and we got our money back without interest and we had legal expense.  If the foreclosures are Sherrif sales out this way there is a right of redemption in those.. Trustee sales on Deeds of trust there is no redemption period.  Exceedingly rare that anything gets redeemed but your not going to get title insurance on a Mortgage foreclosure ( sherrif sale) until redemption period has run.