Minnesota Sheriff Sale, Junior Lien Holder and Auction.com

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Minnesota Sheriff Sale, Junior Lien Holder and Auction.com

Diana Poch
Hinckley, MN · Member since 2017 · 3 posts · 1 vote

We won a property on auction.com that was listed as the redemption period being over in August 2016 - well we won the rights to the sheriff's certificate. In actuality the redemption period expired in 2/2017 so auction.com reached out to Wells Fargo and did a price reduction down the 63,000. In our title company reviewing the title there are two junior liens on the property, one from the HUD and one from the HOA which sold their lien rights to an investment company. We were then told by auction.com we had to wait until the redemption period expired and they would transfer the title to us instead of the Sheriff's Certificate. This would be great news, except that the junior lien holder has filed a notice to redeem and intends to pay off the mortgage amount. If we were the Sheriff's certificate holder (as our contract indicated) we would be entitled to the payoff amount - now we will not receive anything and will not get the property.

So three questions:

1. Has anyone else experienced this sort of situation with auction.com? They have been holding our 4,000 earnest money since summer now and to walk away with nothing would be pretty rough.

2. Is there anyway we can pay off the junior lien holder ahead of time before their redemption? We reached out to them and they are not interested in being paid off.

3. Do we have any recourse on obtaining the payoff amount from Wells Fargo/ Auction.com since we were under a contract with them?

Any and all help will be extremely appreciated. 

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Tim SwierczekPro Member
Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
9y

you  need an experienced real estate attorney not a web forum 

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  • Tim SwierczekPro Member
    Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    you  need an experienced real estate attorney not a web forum 

    2Reply
  • Diana Poch
    OP
    Hinckley, MN · Member since 2017 · 3 posts · 1 vote
    9y

    :)  I've spoken to several and have gotten extremely conflicting responses ranging from you can pay off the lien holder to there's nothing that can be done.  

    But thank you!

    0Reply
  • Corey Blane
    Real Estate Agent · Minneapolis, MN · Member since 2016 · 59 posts · 20 votes
    9y
    A few years back I purchased a house at Sheriff Sale for $48,000. We waited the entire redemption period to take possession of the property. 5 days before the redemption period expired an investor put a mechanics lien on the property so he could redeem it. Unfortunately the junior lien holder then has the right to payoff the first and redeem the property. There's most likely nothing you can do.
    1Reply
  • John Woodrich
    Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    I am with @Tim Swierczek, a dumb attorney is going to be a better resource than an online entrepreneur.  Find an attorney who specializes in real estate.  They can be expensive but in $300 an hour it could save you hours of online research and let you know whether you need to take action or whether you are SOL.  

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    9y

    We don't have redemption periods here, but.....it's not clear if you bid at the sheriff's auction ((which is how you'd receive a sheriff's deed/certificate) OR if you bid after WF took it back at the sheriff's sale, as a REO (which having money in escrow would indicate). I'm fairly certain, if you bought at sheriff's sale, that if someone redeemed, you would Not receive a pay off for the full loan/judgment amount, if it were higher than your bid....you'd receive your bid amount plus some interest/fees, and the foreclosing lender would receive any surplus. This should be a fairly simple question for a local RE attorney to answer, if you give them an accurate account of events.

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  • Tim SwierczekPro Member
    Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Diana Poch have you tried asking the county clerk?  They may know if it's allowed.  They will not give you any legal advice or help but since they see 100's of transactions a month they could like give you a factually based yes or no on if it's possible.

    0Reply
  • Preston Elsenpeter
    Investor · Nisswa, MN · Member since 2015 · 2 posts · 1 vote
    9y

    I've had a similar situation. You will get your earnest money back as long as you provide proof it was sent.

    Are you saying the redemption period expires later this month?

    I do believe the Junior Lien Holder reserves the right to redeem and not be payed off.

    If the pay off amount is much higher than your agreed price of $63,000 and you were under contract you should have recourse of the difference.

    1Reply
  • Diana Poch
    OP
    Hinckley, MN · Member since 2017 · 3 posts · 1 vote
    9y

    The owner's redemption period expires 2/10/17.  The junior lien holder has filed an intent to redeem so they have a 7 calendar day redemption period (Minnesota).  Our contract with auction.com/Wells Fargo expires 2/28/17 but if they no longer own the property; they can't sell it to us.  The payoff amount is 88,000 + 4.625% interest for a year so about 30,000 difference... I don't think Wells Fargo is going to give us the payoff difference though.  

    We asked the junior lien holder if they would be willing to not redeem and buy the property in a simultaneous close from us for less than the redemption amount (we offered to do a purchase price of 75,000) but they were unwilling to do so, which is a bummer since we could have both benefited as we would have at least walked away with some profit and they would have bought a house for 18,000 less than expected.  

    I guess this is one of those SOL situations.  :/  I just wonder how many houses auction.com and Wells Fargo lists that they do not actually own yet and then just hold people's earnest money.  We've had almost 4,000 held since August on this property.  Seems very scam - ish.

    1Reply
  • Andy Schornack
    Banker · Wayzata, MN · Member since 2016 · 59 posts · 17 votes
    9y

    I am a little confused. When you mean you won the rights to the Sheriff's Certificate do you mean you actually bought the Sheriff's Certificate?  It is rare for a bank to provide an option vs just selling the Sheriff's Certificate. Particularly because of titling issues.  I would be curious on how the contract between you, auction.com, and Wells Fargo was drafted. What does it specifically say in regard to the transfer of title (what when where) .  

    The obvious reason for asking is that you would be entitled to the interest during period from the date you bought it until the date it was redeemed.  Sometimes this is a good, relatively nice return. It certainly can get messy and I have not heard of transactions like this through auction.com before. 

    Agreed that a good attorney could help clarify but it is a very interesting situation. 

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