Foreclosure Property W/Subject to mortgage

12 Replies

Hello Fellow Members,

I am interested in a property which is up for sale in County Sheriff sales. I've never been to foreclosure sales and wanted some input from experts. I am planning on taking the deposit amount as cashiers check and fill the form which they need in case of successful bid. I see that in Terms & Sales of property, it is mentioned that the property is Subject to the mortgage of  bank.

Here is the research I have done on the property:

  1. In good school district and safe neighborhood.
  2. 10 years old, which is relatively new.
  3. By going though the county records, I came across the property Appraisal price and came up with rough estimate of what the borrower might have paid off on the mortgage for the duration they are in the house, based on that I set up myself a maximum limit on the price I can buy the property for.
  4. If I am able to get the property for the price I am aiming for and keeping into account for miscellaneous expenses,  The property easily meets the 1% rule for Buy and Hold strategy

Apart from above mentioned points, Could anyone please throw some light if there is anything i need to find out about the property?


Thanks,

Satish K

That sounds some old “standard legal jargon” in a final judgment (we have some antiquated language that means nothing in ours).

The bank may, or may not, let the house go for less than their judgment.  Their judgment amount has No bearing on what you should be willing to pay for it.

Verify it is a first mtg foreclosing, check for back property taxes, hoa, etc.  If the foreclosing bank lets it sell at auction, that is Full satisfaction of That mtg against the property.

@Wayne Brooks I found that property is currently owned by HOA to which it belongs to. Because it is foreclosed by HOA, mortgage is still attached to the property. So, I have to assume the obligations of the mortgage as well as whatever i end up buying the property for at Sheriff sale.

I see that property was last sold in 2008 which was right before the housing bubble and i guess interest rate at the time was around 7-8%.  Assuming all the scenarios, If I am buying this property for Buy and hold strategy, what would be the risks I am looking for?

@Satish Kumar Kommineni Okay, already foreclosed by the hoa is a little twist.

But, Who is foreclosing And are they the first mtg holder?

I don’t know Ohio laws, but there is a possibility there may still be an unpaid hoa debt from the hoa foreclosure....if the hoa has been renting it out, they may have recovered all of that, but you need to verify, or make your best guess.

Get a title search.

@Wayne Brooks : I really thank you very much for your input. To be frank with you I am new to all the legal terms and in fact new to the investing in Real Estate, so I don't know what 1st mortgage holder mean. I did search for property in county clerk's online database and I saw the deed mentioning that the property has been sold to the current resident from the builder. Does it tell anything about first Mortgage holder?.

Is there a way i can search for hoa debt by contacting the builder/hoa?

When you say  title search, I guess paying the title company to do a title search?. Do i need to mention anything specific to look after in title?.

I once again thank you for your time and suggestion.

Chances are that or any properties can get pulled off before auction by the lenders. If seriously interested you need to look at a backup property and actually been to in front of it inspect on public land. Do not stand or get on the property. There are late fees on mortgage lien(?) and hoa fines. Did the owner own IRS back taxes?

@Satish Kumar Kommineni Please, please sit down with a real estate for an hour.....tell him what you want to do and let him tell you what to look for....it will be the st $200-300 you can spend.

A “first mtg” is the first one recorded (ie an owner has 2 mtgs, one for $150,000 and one for $30,000) and is superior to the second mtg.  If the first mtg forecloses, the second mtg gets wiped out, goes away.  If the Second mtg forecloses, the buyer inherits responsibility for the first.

There are many things to look out for in a foreclosure....hoa debts, past property taxes, city/county code violation liens, irs liens, etc.

It is strictly buyer beware and you can lose all or most of your money if you do it wrong.

@Wayne Brooks : Thank you for throwing some light on it. Looks like, still there is more for me to find out to pull trigger on this as I am very new to this. I am in process of contacting Real estate Agent. I am already a member of local REI group, may be i will also speak to couple of them to get a feel of local laws as well.

Originally posted by @Satish Kumar Kommineni :

@Wayne Brooks : Thank you for throwing some light on it. Looks like, still there is more for me to find out to pull trigger on this as I am very new to this. I am in process of contacting Real estate Agent. I am already a member of local REI group, may be i will also speak to couple of them to get a feel of local laws as well.

 if this is a true mortgage foreclosure keep in mind only about 1 in 30 to 50 actually go to sale.. the rest something get pulled for various reasons..