Investor Bought At Aucion-Turns Out To Be 2nd--Wants To Quiet 1st

11 Replies

This is a local ordeal. Investor failed to have title run before bidding. They paid over 100K and then find out they bought the second. 1st hasn't been paid for over five years. They believe an attorney can do a quiet title action on the 1st because no action has been taken by 1st holder to collect. This is the second time a bidder bought a second but I believe the other bidder just forfeited their deposit. This bidder wired funds and THEN found out it is a second. Is this possible for a judge to simply rule that a 1st owed over a 100K automatically has no right to their funds because they have failed to act? This sound really off to me. Any legal minds have any input?

John Thedford, Real Estate Agent in FL (#BK3098153)

No way quiet title will wipe out the first.  

There was a ruling on the lenders stalling foreclosures.  No one gets a free ride.  

Court ruling lets lenders bring stalled foreclosures 'back to life'

His/Her best option is:

1.  try to buy the first at a discount or negotiate a lower payoff.

2. Don't pay real estate taxes and instead purchase the tax lien certificate and after 2 years foreclose on the taxes by applying for tax deed.  If first doesn't step in, then they get wiped out and only then he/she can quiet title.

3. Keep renting the house until he/she gets all of the money back and don't pay the first.

4.  If he/she paid over the judgement amount then he/she can contact first and have them apply for surplus funds this way some of the money goes to pay down first mortgage.  They only have 60 days for this though.

Never ceases to amaze me how often this scenario occurs. Quiet title would be a tremendous waste of time. "Let me sue you because I screwed up and overpaid a second lien foreclosure and the only way I can get out of it is to somehow claim that my screw up is because you did nothing"?

Holy cow, @John Thedford ... they are screwed unless they can get that wire back. And it sounds like it has been hours or days so that option is likely out. That leaves trying to limit losses using other means as suggested above.

Originally posted by @Tom Gimer :

Holy cow, @John Thedford ... they are screwed unless they can get that wire back. And it sounds like it has been hours or days so that option is likely out. That leaves trying to limit losses using other means as suggested above.

 They found out after they sent payment. Got it to a judge and asked judge to rescind sale, Judge said SORRY, NO--and ruled against them. Over 100K spent...on a 2nd...1st is owed over worth less than 200K.  They should have spent $75 for a title report!

John Thedford, Real Estate Agent in FL (#BK3098153)

Wow.  This is every investor's worst fear realized!  I hope they find a solution that helps them recover their funds, or at least mitigate their losses.

If anyone wants to pay 185% of FMV for a property in Lehigh Acres, FL send a PM:)

$75 would have saved this guy! 

John Thedford, Real Estate Agent in FL (#BK3098153)

@Tom Gimer   I bought a property over in Washington state.. and some how the owner said the lender contacted him after he had not paid for a very long time 5 to 7 years.. and said we are just deeding you the property.. we lost our right.. now I had never heard of that before or after.

I bought it I got title insurance.. and sure enough somehow this happened.. I think its one of those you live long enough you see some strange thing happen or maybe its particular to the state of WA.

But as for buying a second .. I know out our way once you hand the check to the crier its over..

WE have to have cashiers checks on the spot for full purchase price.

if you found out the day of the sale their could be a chance to have your bank stop payment on the cashiers check but you would need to be a pretty valuable client for the bank issuing the check to do that for you.. I have done it once.. Not a foreclosure different scenario .. but I bank at a small commercial bank.. if you used a large major bank I bet that would be tough to do.

but once they cash the check I think your out of luck unless the sale was flawed on the trustee side the money is not coming back.

@Jay Hinrichs Once a cashier's check is issued and handed over to a payee, the payment cannot be stopped. If a holder in due course negotiates it within 90 days the bank has to honor it. It doesn't matter how close you are with your bank, these things are as good as cash in hand and the payer is SOL.

The only way out of this one was to reverse the wire and default. Wire reversals need to be done really fast.

In this case even a default would lead to big damages on the resale.

@John Thedford - That is one of my biggest fears in buying foreclosures.  When we bought our first one in Memphis, we were stupidly naive about the process and didn't even know that we could be bidding on a second!  Luckily, it was clean and we are very diligent about our background review.  I'm so very sorry for your friend. :(

@John Thedford . There is no solution.  Losing it or pay the first off is the only solution. Family member has came into this issue. And simply threw away the property and take the lost. There is caution when bidding on foreclosure. All the title search is on the bidder. And bidder takes fully responsibility.   When deal is too good to be true in foreclosure bidding. There is problem. 

Yep, this guy is cooked.....a QT won’t remove a legit mtg and the SOL doesn’t make it void.
Roman is correct, except the tax certificate/deed route doesn’t give you just sends it to public auction where you have to bid against everyone else. The first is entitled to any bid surplus though, so that may help some.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.